SEOUL: The South Korean economy is at risk of losing steam, as poor external economic conditions are expected to stifle investment and export growth amid high inflation, Finance Ministry said in a statement on Friday.
Market volatility and global economic downside risks have increased as a result of the Federal Reserve's accelerated monetary tightening and global supply chain disruptions, according to the Ministry's monthly economic assessment report, known as the Green Book, as reported by the media. "There are concerns about the economic slowdown due to sluggish investment and the feeble recovery of exports," the report noted, "with a continuous buildup in pricing pressure."
The government gave a more pessimistic assessment than the previous month, citing increased fears about stagflation, which is characterised by a combination of decreasing GDP and high prices.
Inflationary pressure has risen quickly due to rising oil and commodity prices, as well as a recovery in demand, owing to the long-running conflict between Russia and Ukraine. Consumer prices in South Korea increased by 5.4 percent year over year in May, the highest increase in nearly 14 years and a rebound from a 4.8 percent increase in April.
Exports, the main driver of economic development, increased by 21.3 percent year over year in May, extending their streak of advances to 19 months. However, rising gasoline costs increased import costs, resulting in a trade imbalance for the second month in a row.
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