Economy was stagnant in February, says gov’t

The Korean government said the economy still remains stagnant as domestic consumption continues to fall and uncertainties rise both at home and abroad.

Exports have improved recently, rising 20.2 percent year on year in February, which is the biggest growth in five years. Petrochemicals and semiconductor products were both strong, the Ministry of Strategy and Finance said Thursday.

The government said it expects exports to remain strong for a period of time but various factors, such as interest rate hikes in the United States and global trade issues, might drag down the economy.

“Korea’s exports and investments have expanded recently but the domestic market remains stagnant due to weak consumption,” said the ministry in a report released Thursday. “Consumer sentiment and the labor market continue to remain slow and they might have negative impacts on the economy later on.”

Domestic consumption in January dropped 2.2 percent compared to the previous month due to weakened consumer sentiment.

“The government will monitor closely various uncertainties that might affect the country’s economy and will react to them preemptively to reduce as much negative impact as possible,” said the report. “We will also proceed with executing this year’s budget as early as possible to boost domestic consumption and investments.”

According to the government’s preliminary data on domestic consumption in February, sales were expected to rise as more people purchased automobiles and credit card transactions rose.

The government said sales of vehicles in the country rose 6.2 percent year on year last month, and credit card transactions rose 11.5 percent in the same period. Sales at discount chains, on the other hand, dropped 14.6 percent and sales at department stores fell 1.1 percent.

Facilities investments, or investments in equipment and machinery, rose for the third consecutive month. They increased 2.6 percent from January. Industrial output in the mining and manufacturing sector jumped 3.3 percent month on month in January thanks to the strong semiconductors and electronics sales.

Global credit rating agency Fitch Ratings on Thursday said the ongoing political uncertainty in the country will have a negative impact as well.

“Political uncertainty is likely to hold back economic activity until a new president is elected,” the Fitch report said. “Uncertainty will delay investment and weigh on consumer confidence. In December 2016, consumer confidence fell to levels not seen since 2009. We do not expect political disruption to severely affect economic activity in the medium term, but Korea could be significantly impacted by a more protectionist world given the highly open nature of the economy.”

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