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South Korea’s economic recovery continues to show limited improvement, primarily due to sluggish domestic demand, according to a report released Monday by the Korea Development Institute (KDI). While some positive signals have emerged, the think tank warns that internal consumption remains a significant drag on the overall economy.
The KDI’s monthly assessment points to a mixed economic outlook. Exports, particularly in semiconductors and key manufacturing sectors, have shown modest growth, helping to stabilize external demand. However, weak consumer spending and subdued private-sector investment are weighing heavily on the recovery, leaving the economy in a precarious state.
This latest assessment comes as South Korea grapples with a global economic slowdown, rising interest rates, and elevated inflation. The central bank has maintained a tight monetary policy to curb inflationary pressures, which, while stabilizing prices, has dampened consumer spending and increased financial burdens for households.
The KDI’s report noted that consumer sentiment remains tepid, reflecting concerns about higher living costs, stagnant wages, and rising debt levels. Retail sales and service sector activity have both struggled to regain momentum, despite efforts by the government to stimulate spending through targeted fiscal measures.
“Consumer spending is not recovering as expected, largely due to the combined effects of inflation and high interest rates,” explained an official from the KDI during a press briefing. “Households are being cautious with their expenditures, which is limiting overall economic growth.”
The government has been actively pursuing policies to stimulate the economy, including increased public spending and support for key industries such as technology and green energy. However, without a sustained rebound in domestic consumption, analysts warn that these efforts may fall short of delivering a robust recovery.