Export and import cargo is stacked at Sinseondae Pier in Busan port. South Korea's current account surplus widened in June as exports — led by semiconductors — surged, expanding the goods trade surplus, according to balance-of-payments data the Bank of Korea released Wednesday. [Yonhap]
Export and import cargo is stacked at Sinseondae Pier in Busan port. South Korea's current account surplus widened in June as exports — led by semiconductors — surged, expanding the goods trade surplus, according to balance-of-payments data the Bank of Korea released Wednesday. [Yonhap]

The government has upgraded its assessment of the South Korean economy, saying the recovery momentum is "strengthening" — raising its diagnosis one notch within a month after describing the recovery as "solidifying" in July.

The upgrade reflects a sharp rise in exports led by semiconductors, along with improvements in domestic demand indicators including consumption, investment and production. However, external uncertainty stemming from the war in the Middle East, inflationary pressure from high oil prices, and sluggish employment in vulnerable segments such as youth workers were cited as risks to the recovery.

In its August edition of the Green Book — a monthly economic assessment — the Ministry of Economy and Finance said Friday that "the South Korean economy is showing signs of a strengthening recovery, with exports rising sharply and domestic demand including consumption showing improvement."

The government's economic assessment has improved for four consecutive months. After dropping the phrase "downside risks to the economy" in May, it described the recovery as "continuing" in June, "solidifying" in July, and now "strengthening" this month.

Export strength drove the recovery. Exports in July surged 62.8 percent from a year earlier, boosted by gains in semiconductors, computers and ships. The average daily export value, adjusted for working days, rose 69.6 percent to $4.12 billion.

Domestic demand indicators also improved. Total industrial output in June rose 2.3 percent from the previous month, with mining and manufacturing output up 6.4 percent and the services and construction sectors gaining 0.7 percent and 4.1 percent, respectively. Retail sales, a gauge of consumption, climbed 2.7 percent, while facility investment rose 5.8 percent — up 21.7 percent from the same month a year earlier.

Indicators tracking current and future economic conditions both rose. The coincident composite index cycle variation rose 0.5 percentage point from the previous month in June, while the leading composite index cycle variation gained 0.9 percentage point. The Consumer Sentiment Index for July came in at 106.8, up 0.2 percentage point from the previous month. The all-industry Corporate Business Survey Index stood at 98.5, up 0.8 percentage point.

Employment showed a broader increase in total jobs, but weakness in vulnerable segments persisted. The number of employed people in July rose by 108,000 from a year earlier, surpassing June's gain of 63,000. The unemployment rate edged up 0.2 percentage point year-on-year to 2.6 percent. Youth employment was particularly weak: the number of employed people aged 15 to 29 fell by 191,000 from a year earlier in July, and the employment rate dropped 1.6 percentage points to 44.2 percent.

The youth unemployment rate rose 1.3 percentage points to 6.8 percent — the largest increase since January 2021, when it climbed 1.8 percentage points. The rate itself was the highest for the same month since 2022, when it also stood at 6.8 percent. Continued job losses in manufacturing and construction mean the economic recovery has yet to spread broadly across the labor market.

Inflation eased somewhat. Consumer prices in July rose 2.8 percent from a year earlier, slowing from June's 3.2 percent. Core inflation, excluding food and energy, rose 2.6 percent, while the index excluding agricultural products and petroleum products gained 2.5 percent. The lifestyle price index also rose 2.5 percent.

However, uncertainty from the war in the Middle East and inflationary pressure from high oil prices remain variables that could weigh on the recovery.

For facility investment, a sharp recent increase in domestic machinery orders was cited as a positive factor, while uncertainty from the Middle East war was flagged as a negative. Construction investment also saw second-quarter orders rise 22.3 percent year-on-year, but a decline in building permit floor area was identified as a constraint.

The Ministry of Economy and Finance said it would "make every effort to stabilize livelihoods — including managing the supply of key goods and keeping prices in check — to minimize the impact of the Middle East war, while swiftly pushing forward a second-half economic growth strategy to address structural challenges such as post-war strategy, reversing potential growth rates and polarization."


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