Gov’t warns of economic concerns

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Gov’t warns of economic concerns

The domestic economy continued to slow last month due to the expiration of extended individual tax cuts on vehicles, and the government warned that the economy might remain sluggish due to various uncertainties such as ongoing corporate restructuring.

In its monthly “green book” report, the Ministry of Strategy and Finance warned that Korean economy is still sluggish, and said that although exports rose for the first time in 20 months in August, the rise was due to poor data from last year and temporary factors.

Economic uncertainties from both the domestic market and overseas, such as interest hikes in the United States and ongoing corporate restructuring in Korea, may also take a toll.

“In August, exports rose 2.6 percent and it was the first time in 20 months that it rose compared to the previous month,” said the Finance Ministry in the report. “We believe that it rose mainly due to the higher number of business days this year compared to the previous year and that there are various uncertainties that might have negative impacts on the Korean economy, such as the U.S. Fed’s interest rate increase, ongoing corporate restructuring and strikes by the automotive industry’s labor unions.”

Facilities investment and retail sales dropped significantly as well, pointing to a slowing in the economy, the Finance Ministry said. Facilities investment, or investment in equipment and transportation, fell 2.7 percent in the second half of this year compared to the same period last year.

“The manufacturing operation rate remained slow at 74.3 percent on average last year, and the fall in automobile sales continued to have a negative impact on facilities investment here in Korea,” the report said.

In July, retail sales dropped 2.6 percent compared to the previous month, and the Finance Ministry cited the June 30 expiration of extended tax cuts on vehicles as the one of the main factors in the fall. In fact, sales of non-durable goods such as vehicles dropped 9.9 percent compared to the previous month while sales of cars alone fell 26.4 percent during the same period.

Construction investments, on the other hand, rose 10.8 percent year-on-year in the second quarter of this year, largely thanks to an improved civil engineering sector.

Meanwhile, housing prices in August rose 0.07 percent compared to the previous month and grew 0.16 percent for the Seoul metropolitan area during the same period. The price of jeonse, or lump-sum rental deposits, rose 0.1 percent month-on-month in August.

Housing transactions rose 3.2 percent compared to the previous month to reach 92,611 cases, but transactions dropped 13.6 percent compared to the previous year’s 110,675 cases.


BY KIM YOUNG-NAM [kim.youngnam@joongang.co.kr]

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