(ATTN: UPDATES with more details in paras 2, 13-16; ADDS photo)
By Kim Soo-yeon
SEOUL, Oct. 15 (Yonhap) — The South Korean economy is facing continued uncertainty as slumps in person-to-person service sectors have extended amid the latest spike in COVID-19 cases, the finance ministry said Friday.
The government said the on-year growth of consumer prices could exceed 3 percent in October — higher than the central bank’s inflation target of 2 percent — due to last year’s low base.
In its monthly economic assessment report, the ministry said the country’s exports remained robust, while the job market has markedly improved despite the fourth wave of the pandemic.
“Economic uncertainty persists, led by (slumps) in the face-to-face service segments,” the Ministry of Economy and Finance said in the Green Book.
Asia’s fourth-largest economy is on a recovery track, supported by brisk exports of chips and autos. But the recovery of private spending remains fragile as the country has maintained the toughest-ever virus curbs to stem the resurgence in virus cases.
For about three months, the greater Seoul area — home to half of the country’s population of 52 million — has been under the toughest social distancing rules, which include restrictions on business operations and private gatherings.
Card spending did not decline amid the current wave, in stark contrast with consumption patterns during previous flare-ups in virus cases.
Credit card spending rose 8.8 percent on-year last month, marking the eighth consecutive month of gains, according to the ministry. Sales at department stores increased 21.9 percent from a year ago.
But domestic sales of cars fell 33.3 percent on-year in September, extending their decline to a seventh month, and sales at discount stores slid 9.5 percent.
The Korean economy is facing increasing downside risks as the uptick in virus cases is delaying the recovery of private spending, The Korea Development Institute (KDI), a state-run think tank, said in a recent report.
Still, the Bank of Korea kept its 2021 growth forecast for Korea at 4 percent, noting the surge in infections is not likely to significantly dent the economic recovery.
The finance ministry expected the Korean economy to grow 4.2 percent for this year. The International Monetary Fund maintained its 2021 growth forecast for Korea at 4.3 percent despite its downward revision for advanced countries.
The country faces growing inflationary pressure due to high oil and farm product prices amid the economic recovery.
The consumer price index grew 2.5 percent on-year in September, compared with a 2.6 percent on-year gain in August. The consumer prices grew more than 2 percent for the sixth consecutive month last month.
The ministry said the price growth could top 3 percent in October as the government offered one-off state subsidies for mobile phone bills a year earlier, helping to drive down inflation growth.
Upward pressure on inflation remains high as oil prices climbed and the Korean currency weakened against the U.S. dollar, Kim Young-hoon, a senior ministry official, told reporters.