Government’s economic forecast gets sunnier

The government’s view on economic recovery has brightened as the country’s service industry output and facility investment slightly improved during the past three months, the Ministry of Strategy and Finance said yesterday.

But downward risks from the anticipated tapering of U.S. quantitative easing will continue, the report noted.

The service industry grew 0.2 percent month-on-month in May, owing to solid growth in the science, technology, finance and insurance sectors, the ministry said. Output jumped 1.6 percent year-on-year, according to data from Statistics Korea.

Facility investment expanded 1.2 percent in May compared to the previous month, on spending in the machinery development sector.

Still, that was down 11.9 percent from a year earlier. Total facility investment in the first quarter of the year jumped 2.6 percent compared to the previous quarter.

Worries about the country’s sluggish mining and manufacturing output and construction investment still exist, serving as potential risks to growth in the third quarter, the report said.

The country’s flagship mining and manufacturing industries kept shrinking, except for slight gain in April, serving as a major drag on economic recovery.

Construction investment dropped 4.3 percent in May from the previous month.

Private consumption decreased throughout the first half of the year. However, the government sees some signs of improving consumption lately, saying that it expects a gradual recovery in the second half.

Sales at three major department stores rose 3.7 percent in June from a year earlier and 1 percent from May, the finance ministry estimated.

“It is early to say the economy is starting to recover, but there are positive signs like improving consumption and investment in facilities,” said Lee Hyung-il, economist at the economic policy bureau at the finance ministry.

Meanwhile, the International Monetary Fund yesterday downgraded its 2013 growth forecast for the global economy to 3.1 percent, down 0.2 percentage point from its projection in April.

BY SONG SU-HYUN [ssh@joongang.co.kr]