S. Korean economy faces "downward pressure," yet shows "positive signs"

The economy remains vulnerable to persistent challenges including sluggish spending and construction activity BUT consumer sentiment appears to be improving.

Our correspondent Moon Ji-young covers the economic assessment for July by the Finance Ministry.

South Korea's economy continues to face downward pressure due to a delayed recovery in domestic demand and ongoing trade risks, but some "positive signs" such as improving consumer sentiment are emerging.

That's according to the latest economic green book a monthly economic assessment report released by the Finance Ministry on Friday.

This also marks the seventh consecutive month that the government stated that the economy faces "downside pressure." However, the ministry slightly toned down its assessment by omitting the term "increasing" in reference to downside risks.

"Recent downward pressure on the Korean economy is largely due to the slow recovery of domestic demand, particularly in consumption and construction investment, coupled with persistent employment difficulties in vulnerable sectors and worsening external conditions stemming from U.S. tariff impositions. However, we're also starting to see some positive signs, like an improvement in consumer sentiment."

He added that while downward factors previously dominated, both upward and downward factors are now coexisting.

"It seems the recent significant rise in stock prices and expectations for supplementary budget projects are positively influencing consumer sentiment. There's potential for these factors to continue to positively affect consumption in the future."

Despite these positive signals, trade risks in exports remain a significant concern as the August 1st deadline for tariff negotiations approaches.

The ministry analyzed that exports in June rose by 4-point-3 percent compared to the same month last year, largely attributed to improved semiconductor market conditions and pull-forward demand before the end of the pause on U.S. reciprocal tariffs.

To boost economic and livelihood recovery, the Ministry has pledged to swiftly execute a supplementary budget worth 31-point-8 trillion won or around 23 billion U.S. dollars.

It also reaffirmed its efforts to ensure that the livelihood recovery consumption coupons, scheduled for distribution from July 21, become a catalyst for revitalizing domestic demand, including consumption and local economies.

To address trade risks, the government said it is committed to providing comprehensive support for Korean companies affected by U.S. tariff impositions.

Moon Ji-young, Arirang News.