Key Points
Construction sector experiencing persistent sluggish investment
Export growth impacted by semiconductor market challenges
Global trade tensions creating economic uncertainty
Bank of Korea cuts interest rates to support growth
"Recently, the domestic economy has shown signs of mounting downside risks due to sluggish construction and deteriorating export conditions," the Korea Development Institute (KDI) said in its monthly economic assessment report.
The KDI has now noted downside risks for three consecutive months, reports Yonhap news agency.
While the impact of political uncertainty has partially eased, worsening external conditions continue to weigh on the nation's export-dependent economy, the KDI said.
The think tank pointed out that consumer and business sentiment indicators suggest the economy is gradually recovering from the shock caused by President Yoon Suk Yeol's brief imposition of martial law in December.
However, concerns over a global trade war intensified as U.S. President Donald Trump has escalated tariff measures against major trading partners in an effort to reduce America's trade deficits and achieve broader policy goals.
In addition to the slowing growth of semiconductor exports, the persistent underperformance of other export items has led to a low overall export growth rate, the KDI added.
The think tank pointed out that while South Korea's manufacturing sector has shown modest improvement, sluggish construction investment and weak employment in the construction sector persist.
Meanwhile, South Korea's central bank late last month slashed its benchmark interest rate by a quarter percentage point to shore up economic growth affected by domestic political turmoil and the Donald Trump administration's sweeping tariffs.
The monetary policy committee of the Bank of Korea (BOK) cut its key rate by 25 basis points to 2.75 percent during a rate-setting meeting in Seoul.
The move came a month after its rate freeze decision, which was aimed at supporting the weak local currency while assessing the impact of two rate cuts in the October and November meetings.
—IANS
