SEJONG, Jun. 4 (Korea Bizwire) — The South Korean economy remains weak overall as a slump in exports weighs down on its growth, a state-run think tank said Thursday.
In its latest report on the economy, the Korea Development Institute (KDI) said private consumption has improved at a moderate pace, but a drop in outbound shipments and predictions of a weaker global economy are hindering growth.
“Investment-related leading indicators showed positive trends amid a gradual improvement in private consumption,” the institute said. “This may be a sign of a possible turnaround in weak domestic demand.”
Government data showed private consumption in April improving gradually as service sector output and retail sales did better than in the past. Retail sales, a main barometer of consumer spending, rose 4.9 percent on-year thanks to strong passenger car sales.
The KDI said leading indicators in construction investment and other investment-related indexes also showed positive trends, pointing to a gradual recovery in overall investment conditions.
On the downside, the think tank said weak global economic growth is directly impacting exports, the country’s main growth engine. Exports nosedived 10.9 percent on-year to US$42.39 billion in May.
The KDI said that the weakening price competitiveness of exporters and slackening manufacturing production remain a source of concern for Asia’s fourth-largest economy.
“OECD’s leading economic indicators are on a decrease, and the global economy is forecast to grow slower than expected, signaling that export conditions may not turn for the better in the short run,” it said.
On manufacturing, the institute said the capacity utilization rate of local factories stayed in the low 70 percent range, in a clear sign that the pace of growth has not gathered momentum across the economy as a whole.
The latest assessment comes after the KDI lowered South Korea’s growth outlook for 2015 to 3 percent last month from a 3.5 percent forecast in December. Last year, the Korean economy grew 3.3 percent from 2013.