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(LEAD) Raging omicron feared to hamper private spending recovery: finance ministry

All News 11:17 February 18, 2022

(ATTN: UPDATES with more details in paras 5, 8-10)

SEOUL, Feb. 18 (Yonhap) -- South Korea's economy is on a recovery path on the back of robust exports, but the fast spread of the omicron variant is feared to hurt the recovery of private spending, the finance ministry said Friday.

External economic uncertainties also heightened as oil prices have surged and volatility in the financial market has increased amid geopolitical risks between Russia and Ukraine, the ministry said in its monthly economic assessment report, called the Green Book.

"South Korea's exports have extended their robust growth and the number of employed people sharply rose. But the spread of the omicron variant could (negatively) affect domestic demand," the report said.

This photo, taken Jan. 16, 2022, shows a sign put up at a restaurant in the university district of Shinchon in western Seoul that says it will temporary close due to the COVID-19 pandemic. (Yonhap)

This photo, taken Jan. 16, 2022, shows a sign put up at a restaurant in the university district of Shinchon in western Seoul that says it will temporary close due to the COVID-19 pandemic. (Yonhap)

South Korea's daily virus cases surged to 100,000 for the first time Friday amid concerns that the current wave has yet to reach its peak.

The country reported 109,831 new COVID-19 infections Friday, raising the total caseload to 1,755,806, according to health authorities.

Despite the uptick in virus infections, the government decided to partly relax tough virus curbs to support small businesses hit hard by the pandemic.

Earlier in the day, the government decided to extend business hour curfews on restaurants and cafes by one hour to 10 p.m. while maintaining the cap on private gatherings at six. The measures will be effective starting Saturday until March 13.

The ministry said it needs more time to assess the impact of the eased virus curbs on consumption and the service sector.

"The relaxed social distancing rules could have positive effects on (private spending). But as virus cases exceeded the 100,000 mark, people may voluntarily restrict outdoor movements or consumer sentiment could worsen," Kim Young-hoon, a financial ministry official, told reporters.

The government said the impact of spiking COVID-19 cases on domestic demand has tapered down compared with previous waves as people have changed their consumption patterns by relying more on online shopping.

The ministry said sales at department stores and online shopping rose and consumer sentiment improved in January despite the flare-up in virus cases.

Card spending went up 17.5 percent on-year last month, marking the 12th straight month of gains. Sales at department stores increased 31.5 percent on-year. But domestic sales of autos fell 19.7 percent on-year.

Private spending grew 1.7 percent in the fourth quarter of last year from three months earlier, a turnaround from a 0.2 percent on-quarter fall in the third quarter, according to central bank data.

South Korea faces growing inflationary pressure amid soaring energy costs and the economic recovery.

In January, consumer prices rose 3.6 percent from a year ago, compared with a 3.7 percent on-year gain in December last year. Consumer inflation grew more than 3 percent for the fourth straight month. The BOK aims to keep annual inflation at 2 percent over the medium term.

Tensions between Russia and the U.S. over Ukraine have driven up already high oil prices. Russia is one of the largest oil producers.

Dubai crude, South Korea's benchmark, soared to $93.05 per barrel Tuesday, up from $77.12 at the end of last year. South Korea depends mainly on imports for its energy needs.


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