SEJONG, June 17 (Yonhap) -- The South Korean economy is at the risk of losing steam as deteriorating external economic conditions are feared to dent investment and export growth amid high inflation, the finance ministry said Friday.
Market volatility and global economic downside risks further expanded due to the Federal Reserve's accelerating monetary tightening and global supply chain disruptions, the ministry said in its monthly economic assessment report, called the Green Book.
The government presented a bleaker assessment than the previous month amid growing concerns about stagflation, a mix of slowing growth and high inflation.
Inflationary pressure has rapidly built up amid soaring oil and commodity prices, caused by the protracted war between Russia and Ukraine, and the recovery in demand.
South Korea's consumer prices jumped 5.4 percent on-year in May, the fastest rise in almost 14 years and a pickup from a 4.8 percent spike in April.
Exports, the main driver of economic growth, rose 21.3 percent on-year in May, extending their gains to the 19th month. But high fuel costs drove up the country's import costs, resulting in a trade deficit for the second straight month.
South Korea's stocks and currency tumbled this week over fears about the Fed's aggressive monetary tightening.
After a two-day policy meeting, the Fed raised the interest rate by 75 basis points Wednesday (U.S. time) to tame soaring inflation. It marked the first such steep rate hike since 1994.
The government report showed sales at department stores and card spending grew at a faster pace in May than the previous month amid relaxed virus curbs.
Card spending rose 16.4 percent on-year last month, marking the 16th straight month of gains. The reading accelerated from a 13.8 percent on-year increase in April.
Sales at department stores increased 20.8 percent on-year in May, higher than a 15.6 percent rise in April. But domestic sales of autos dropped 5.4 percent, extending their falls into the third month.
The finance ministry unveiled its new economic policy plan Thursday that centers on deregulation and tax cuts in a bid to support private sector-led economic growth.
The government lowered its 2022 economic growth outlook to 2.6 percent from its December estimate of 3.1 percent, while sharply raising this year's inflation outlook to a 14-year high of 4.7 percent from 2.2 percent.
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