South Korea sees solidifying economic recovery but persistent livelihood burdens

South Korea's government has painted a more optimistic picture of the national economy, describing the recovery as "solidifying" due to strong export performance and a rebound in domestic consumption. This marks an improvement from the previous month's assessment, reflecting positive trends in key economic indicators.

The Ministry of Economy and Finance highlighted in its July economic trends report that the economy is showing a "solidifying recovery trend." This is attributed to a significant expansion in first-quarter growth, sustained export increases, and improvements in domestic demand, including consumption, which had previously faltered due to factors like the Israel-Iran conflict. The government had previously removed the phrase "downward economic risk" last month and has now upgraded its assessment of the recovery from "continuing" to "solidifying."

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Recently, our economy is showing a solidifying recovery trend, with first-quarter growth significantly expanding, exports continuing their sharp increase, and domestic demand, including consumption, which had faltered due to the Middle East conflict, showing improvement.

Export figures have been particularly strong, with a 70.9% year-on-year increase in the past month, boosted by shipments of semiconductors, computers, ships, and automobiles. Consumer sentiment also showed a slight improvement, with the consumer sentiment index rising to 106.6. Retail sales, measured by credit card approvals, continued their double-digit growth for the fifth consecutive month, indicating a healthy consumer spending environment.

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Due to the impact of the Middle East conflict, burdens on people's livelihoods continue, such as price increases and employment slowdowns.

However, the government acknowledged that challenges remain for ordinary citizens. The impact of global events, particularly the conflict in the Middle East, continues to fuel inflation and slow down employment growth. While the number of employed individuals increased year-on-year in the past month, the overall employment rate saw a slight decline. Consumer prices rose by 3.2% year-on-year, driven by increases in agricultural, livestock, and fishery products, as well as sustained high oil prices.

In response, the government pledged to "make every effort to stabilize livelihoods" by managing the supply of key goods and controlling prices. It also intends to accelerate the implementation of its "Economic Growth Strategy for the Second Half of 2026," which aims to address structural issues such as potential growth rate recovery and widening economic polarization.

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The upgrade in the assessment of the economic recovery trend is in line with the Ministry's upward revision of this year's growth forecast from 2% to 3%.