S. Korean economy losing steam on weakening global demand: KDI
SEOUL, Sept. 7 (Yonhap) -- The South Korean economy is losing steam as exports growth has slowed down amid weakening global demand, led by China, a state-run think tank said Wednesday.
South Korea's service sector has maintained its recovery, led by a rebound in in-face services, but economic downside risks have expanded due to the global economic slowdown, the Korea Development Institute (KDI) said in a monthly economic assessment report.
"Amid rate hike drives at home and abroad, COVID-19 lockdowns in major Chinese cities added downward pressure on economic activity," the report said.
Fears about stagflation, a mix of slowing growth and high inflation, have increased for Asia's fourth-largest economy due to heightened external economic uncertainty.
Exports, the main driver for economic growth, showed signs of slowing as global demand has weakened. Overseas shipments grew for the 22nd straight month in August, but the growth in exports eased to a single-digit gain for three months in a row. Exports rose 6.6 percent on-year in August.
Exports of semiconductors declined for the first time in 26 months last month amid falling chip prices and slowing global demand.
South Korea also suffered a record high monthly trade deficit of US$9.47 billion in August due to high global energy prices. The nation logged the trade deficit for five months in a row for the first time in about 14 years.
"The downturn in the semiconductor industry could pose a threat to South Korea's economic growth," the KDI said.
The country's consumer prices grew at a slower pace in August after running at a 24-year high the previous month as global oil prices retreated amid worries about the global economic downturn. But inflationary pressure still remains high, given volatility in oil prices and a weaker won.
Consumer prices, a key gauge of inflation, jumped 5.7 percent last month from a year earlier, easing from a 6.3 percent surge in July. The on-year growth of consumer inflation slowed for the first time in seven months.
The Bank of Korea (BOK) is widely expected to further raise the key interest rate in the coming months to tame inflation.
Last month, the BOK raised the key interest rate by 0.25 percentage point to 2.5 percent. The decision followed its first-ever "big-step" rate hike of 50 basis points in July and marked the seventh rate increase since August last year.
In its latest revised outlook, the BOK lowered its 2022 economic growth forecast to 2.6 percent from 2.7 percent. The central bank sharply raised this year's inflation estimate to a 24-year high of 5.2 percent from 4.5 percent.
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