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(LEAD) S. Korean economy enters slowing mode: KDI

All News 15:40 March 07, 2016

(ATTN: ADDS finance ministers comments in last 4 paras)
By Kim Boram

SEJONG, March 7 (Yonhap) -- The South Korean economy has entered a slowdown mode due largely to faltering exports and flaccid domestic consumption coupled with waning global demand, a state-run think tank said Monday.

"South Korea's major indicators exhibited continuing sluggishness, signaling a gradual deceleration in economic growth," the Korea Development Institute (KDI) said in its monthly evaluation of the country's economic conditions.

"Exports declined continuously due to slowing global growth. As a result, mining and manufacturing production and shipments have decelerated further," KDI continued.

Asia's fourth-largest economy posted a 12.2-percent on-year drop in its February outbound shipments, narrowing the decline from January's 18.8 percent on increased workdays.

But the February figure extended its losing streak to 14 straight months, the longest record in the country's trade history.

Industrial output, directly linked with exports, dropped 1.9 percent on-month in January, dragged down by sluggish production in the automobile and information technology industries.

The manufacturing inventory-to-shipments ratio stood at 128.4 percent, up from 120.6 percent a month earlier.

"Manufacturing shipments decreased further mostly in exports and the inventory-to-shipments ratio seems to have rebounded as a result," the KDI report said.

Meanwhile, domestic demand showed weakening signs in overall improvement in the aftermath of the government-led stimulus programs that expired at the end of last year.

"Retail sales improved slightly on temporary factors but the consumption sentiment stayed stagnant, signaling weakening growth in private consumption," read the report.

The retail sales index rose 4.5 percent on-year in January, but that of durable goods decreased 2.9 percent on falling passenger car sales.

At the same time, consumer sentiment has been on the decline for three consecutive months, recording an eight-month low of 98 in February.

The Seoul government earlier announced a set of pump-priming measures to prop up the economy including an extension of the tax-cut scheme by six months.

However, South Korea's finance minister said it is too early to walk on thorns, as some signs of recovery can be seen in the latest economic indices.

"When we look closely into the economic data, there are positive signs," Finance Minister Yoo Il-ho said during a staff meeting on Monday. "It's necessary to be cool-headed, but we have to be on our guard against excessive fears."

He cited that retail sales were on a roll in January without slumping auto sales, and February's outbound shipments improved 11.2 percent on-year in terms of volume, with their value tumbling 12.2 percent due to a sharp drop in export prices.

Yoo, who also doubles as the deputy prime minister for economic affairs, said he will unveil a comprehensive plan later this month to support exporting firms and remove related trade regulations in order to make a turnaround in falling exports.


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