Korea's industrial production and domestic demand have remained sluggish in recent months, but they are expected to slightly recover later this year, the finance ministry said Wednesday.
A protracted slump in the nation's exports is also expected to ease, while the recent government decision to extend the individual consumption tax cut may have a positive effect on domestic consumption, said the ministry in its latest economic assessment report called the Green Book.
According to the report, retail sales dropped 1.4 percent in January from a month earlier due largely to a sharp drop in car sales as the government-led excise tax cut program was set to finish in December.
Exports plunged 12.2 percent on-year last month, extending its losing streak to a record 14 straight months.
Industrial output fell 1.8 percent on-month in January, with facility investment sinking 6 percent from a month earlier.
"Recently, the Korean economy faced a drop in domestic demand due mainly to a finished government tax plan amid protracted sluggish industrial output," the ministry said.
Strong domestic consumption in the final six months of 2015 largely contributed to last year's 2.6 percent growth of Asia's fourth-largest economy.
In the fourth quarter, private consumption expanded 1.5 percent on-year, while retail sales jumped 3 percent over the cited period.
On the other hand, the country's exports, the key economic driver, posted negative growth for every single month last year, marking an 8 percent drop for all of 2015.
The ministry expects Korea's exports and domestic demand to rebound in the coming months on the government stimulus package despite a slowdown in China, a possible further rate hike in the United States and the low oil price trend.
And the government has decided to spend more than 40 percent of its 2016 budget in the January-March period to tackle plummeting exports and flaccid domestic consumption, and extend the tax benefit program for an additional six months.
It cited that February's outbound shipments improved somewhat as their monthly decline narrowed to 12.2 percent from January's 18.8 percent dive, with the figure logging positive growth in terms of volume. (Yonhap)