The South Korean economy is on the recovery path, but external economic uncertainty remains high due to rising energy costs and the US Federal Reserve's monetary policy adjustments, according to a state-run think tank.

According to reports citing the Korea Development Institute's (KDI) monthly economic assessment, the manufacturing industry has maintained robust development, and the latest increase in Covid-19 cases appears to have had modest effects on the service sector, compared to prior waves of the pandemic. "However, ongoing increases in raw material prices and volatile financial markets signal that economic uncertainty remains high," according to the report.

On the basis of strong semiconductor and auto exports, the South Korean economy is on the mend. Last year, Asia's fourth-largest economy grew by 4 percent, the quickest rate in 11 years. Despite an increase in Covid cases, private expenditure increased in the fourth quarter, the latest indicator that the pandemic's detrimental impact on the service sector appeared to have subsided.

According to central bank data, private expenditure increased by 1.7 percent in the fourth quarter of last year from the previous three months, reversing a 0.2 percent drop from the previous quarter. However, rising oil prices and uncertainty regarding the Fed's monetary policy normalisation have heightened external economic risks.

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