Slow recovery blamed on exports

Sluggish exports are holding back Korea’s economy from recovery, while gradual improvements were seen in consumption and investment, according to the Korea Development Institute (KDI) on Monday.

“Slowdown in world economies continues to hurt Korea’s export business in August, constraining recovery of the country’s manufacturing sector,” KDI said in its monthly economics report.

In August, Korea’s exports fell 14.7 percent year-on-year, as its exports to China, Korea’s biggest trading partner, declined 8.8 percent. Exports to Japan fell 24.4 percent, to the European Union by 20.8 percent and to the United States by 4.4 percent compared to the same period last year.

KDI said exports of ships, petrochemical products, cars and auto parts have declined, while exports of wireless communications devices and memory chips fared well.

“The overall world trade volume is slowing down, and economic instability in China and uncertainties in the world economy are making things worse. We do not see Korea’s export environment improving visibly in a near future,” the KDI said.

Imports also fell 18.3 percent year-on-year as crude oil prices remained weak. The KDI said it expects the value of imports to continue to fall as oil prices fall further.

Trade balance maintained a surplus of $4.3 billion in August, it said.

In contrast, Korea’s consumption and investments started to pick up.

In July, retail sales rose 1.9 percent, making a steady recovery from June when the country was hit by the Middle East respiratory syndrome.

The consumer sentiment index also rose by 2 points in August, indicating potential for normalization.

The service sector also started to show signs of life, slowing the velocity of its negative growth.

Wholesale and retail sector growth was down 0.2 percent, and the hospitality and food industry fell 5.4 percent. The arts, sports and leisure-related service segment was down by 2.8 percent. Despite the negative growths, the rates of falling slowed from the previous month.

Meanwhile, investments were picking up, with the facility investment index rising 6.9 percent year-on-year led by increased investment in machineries in July.

The number of newly employed people was up 1.3 percent to 326,000 in July, led by the manufacturing sector, which saw new employment growth of 3.9 percent. The service sector’s new employment growth rate was comparatively lackluster at 1.2 percent, as the negative effects from MERS continued to affect the industry, according to the KDI.

BY PARK JUNG-YOUN [park.jungyoun@joongang.co.kr]