The government, in its assessment of our economy, used the term 'increased downside risk,' evaluating that economic uncertainty is expanding. This is interpreted as a reflection not only of the sluggishness of economic indicators and changes in the trade environment but also the market instability triggered by the recent martial law situation on Dec. 3.
The Ministry of Strategy and Finance, in its Dec. 13 'December Recent Economic Trends' (Green Book) report, noted, 'Recently, our economy is experiencing continued price stability; however, there are concerns about increased downside risks due to the expanding domestic and international uncertainties leading to the weakening economic sentiment of both households and corporations.' The analysis suggests that with the prolonged impeachment situation after the declaration of martial law, there is a significant possibility that consumer spending will shrink and corporate investment will also decelerate.
What stands out most in this assessment is the change in the government's tone on economic evaluations. The phrase 'economic recovery trend,' which had been maintained for six months, was reduced to 'modest economic recovery' in November and completely removed in December, making the economic assessment more cautious. However, direct expressions like 'martial law' or 'impeachment situation' were not used.
There is also an interpretation that the market instability following the declaration of martial law had an impact on this assessment. The foreign exchange market showed great volatility as it soared to 1,442 won per dollar immediately after the martial law declaration, and the Korea Composite Stock Price Index (KOSPI) fell below the 2,400 level. It is analyzed that political factors have increased economic uncertainty and negatively affected market sentiment.
The sluggish trend of economic indicators also supports the change in the government's assessment. In the key industrial activity indicators for October, construction production decreased by 4% compared to the previous month, continuing a downward trend, and mining and manufacturing production remained flat (0.0%). Facility investment decreased by 5.8% from the previous month, and retail sales fell by 0.4%.
The government viewed the increase in credit card approval amounts and sales at discount stores in November retail sales positively, but analyzed that the decrease in domestic passenger car sales and department store sales acted as negative factors. Meanwhile, exports maintained a steady trend. November exports increased by 1.4% year-on-year, marking 14 consecutive months of growth.
Economic sentiment indicators also showed a downward trend. The consumer sentiment index (CSI) in November was 100.7, down 1.0 points from the previous month, and the corporate sentiment index (CBSI) also fell by 0.6 points for performance and 0.1 points for expectations. The leading economic index also fell by 0.1 points compared to the previous month, heightening concerns about the economic outlook.
However, employment and prices showed relatively stable tendencies. The number of employed people in November increased by 123,000 compared to the same month last year, improving from October (83,000 increase). The unemployment rate was 2.2%, down 0.1 percentage points from the same month last year. The consumer price index in November rose by 1.5% year-on-year, maintaining a stable rate of price increase. The core consumer price, excluding food and energy, rose by 1.9%, and the index excluding agricultural and petroleum products increased by 1.8%.
Regarding the global economy, they assessed, 'While there is an overall recovery trend, uncertainties are increasing due to geopolitical risks in the Middle East and potential changes in the trade environment.' Concerns about the spread of protectionism following the inauguration of the second Trump administration are also believed to have influenced this assessment.
The government stated, 'We will maintain firm external credibility through collaborative efforts with related organizations, with the Economic Relations Ministers' Meeting serving as the control tower,' and added, 'We will promote efforts to strengthen industrial competitiveness along with devising support measures for public livelihood stabilization.'