Economic slowdown partially easing, finance ministry says

People shop for groceries at a supermarket in Seoul on July 13. [NEWS1]

Korea's economic slowdown is partially easing amid recovering exports and weakening inflation, according to the Ministry of Economy and Finance on Friday.

The ministry's August monthly assessment report attributed the good news to slowing inflation, recovering exports like chips and improving economic sentiment and employment.

The ministry removed the word “downward” from the report, a month after it wrote that “downward risks had eased” in July.

The ministry had expressed "concern" about the economic "slowdown" throughout the second half of last year and into January.

“Variables may arise due to seasonal factors, but the general trend shows a gradual improvement,” said Lee Seung-han, the director of the ministry's economic analysis division on Friday. “We’ve taken into consideration signs of recovery and improvements in terms of exports and manufacturing, which were the biggest factors slowing down the economy.”

Korea reported a trade surplus for the second consecutive month in July, gaining $1.63 billion. In June, the country posted a trade surplus for the first time in 16 months after suffering the longest trade deficit since 1997.

Chip exports are estimated to have risen in July, while export results from Aug. 1 to 10 achieved a high for the year, according to the ministry. Chip exports grew 8.1 percent in May on year, and 21.6 percent in June.

The ministry noted heavy rainfall and heat waves in July and August could create uncertainties in inflation, which has been slowing for the sixth consecutive month through July. The upcoming Lunar New Year holiday in late September could also accelerate consumer price growth.

Consumer prices grew 2.3 percent on year last month, the lowest mark in 25 months, on lower oil prices.

It was the second straight month the rate has stayed at the 2 percent level.

The ministry added employment is also improving.

The employment rate in July was 63.2 percent, a record high for the month, while the unemployment rate stood at 2.7 percent, a record low for the month.

The state-run Korea Development Institute (KDI) similarly said in a report last week that the economy is gradually moderating as the services sector continues on a modest upward trajectory.

It added that sluggishness in manufacturing production is showing signs of moderation, led by semiconductors.

But some experts say the economy will remain weak this year.

“Economic recovery will be difficult to achieve within the year,” the Korea Economic Research Institute (KERI) said in a statement on Friday.

It predicted Korea will grow 1.3 percent this year, lower than the 1.4 percent and 1.5 percent forecasts made by the Ministry of Economy and Finance and the KDI, respectively. It added the forecast could be cut additionally, depending on the economic performance of key countries such as China and the United States.

However, it predicted inflation will stabilize towards the end of the year ends as global oil prices level off.

BY JIN MIN-JI [jin.minji@joongang.co.kr]