South Korea’s economy has pulled off modest gains in recent months but eurozone woes and other overseas developments are fueling uncertainties that can hurt future growth, a state-run think tank said Monday.
In its monthly economic assessment report, the Korea Development Institute said that industrial and service sector outputs, private consumption, business investment and labor market conditions all improved in April compared to the previous month.
The trade surplus of Asia’s fourth-largest economy grew in May from April, while consumer prices remained unchanged at 2.5 percent last month, it added.
Industrial and service sector production grew 0.9 percent and 0.2 percent on-month, which helped push up factory operating capacity by 1.2 percentage points to 79.3 percent.
Private consumption and business investment, key barometers of economic health, gained 1.0 percent and 5.0 percent, respectively, with 419,000 new jobs being created in April, roughly the same as the month before.
It said May’s trade surplus reached $2.40 billion, from $2.12 billion in April.
“The economy is showing signs of slight improvements after the downward trend observed earlier, but external uncertainties arising from the fiscal crisis in Europe are still growing,” the KDI said.
The trade surplus was caused by imports falling at a faster pace than exports, with the country’s industrial output gains being curved by persistent problems facing the construction sector, it pointed out.
The institute, in addition, said while the global economy is moving forward, concerns surrounding the European Union’s fiscal issues have raised overall downward risks, which can cause trouble for Asia’s fourth largest economy.
“Europe’s economies struggled in the first quarter with key indicators heading south as concerns have mounted that the continent’s fiscal problems may be spreading to the financial sector,” the think tank said.
It said that China, the world’s No. 2 economy, is also trying to cope with a drop in exports that has affected consumption, investment and other domestic indices.
Both China and Europe are key trading partners and so slowdowns in growth can seriously hurt South Korea’s exports and overall growth.
Seoul said the country may grow 3.7 percent in 2012, from 3.6 percent reached last year, although the Bank of Korea and International Monetary Fund said growth may reach 3.5 percent. The KDI also said South Korea may grow 3.6 percent this year, down from a 3.8 percent forecast in late 2011.
