The South Korean economy is entering a "recovery phase" on the back of signs of an export rebound, while the geopolitical tension from the Middle East is emerging as a new uncertainty, the finance minister said Sunday.
"We believe that chips are gradually supporting exports again," Finance Minister Choo Kyung-ho said during a meeting with reporters held on the margins of the annual International Monetary Fund and the World Bank meetings in Marrakesh, western Morocco.
"There is an industry outlook that (exports) of chips have hit the nadir and are recovering gradually. The trend will become clearer in the fourth quarter as well as 2024," Choo said. "The key point is that it seems the economy is beginning to enter a recovery phase."
The remark came after South Korea's exports fell for the 12th consecutive month in September but logged the smallest on-year decline so far this year, as global demand for semiconductors has been on the recovery track.
The finance minister added that other major economic indicators, including inflation and employment, also suggest a brighter outlook on the South Korean economy.
"Major economies are currently experiencing inflation rates of approximately 5 to 6 percent, whereas South Korea's figures hover around the 2 to 3 percent range," Choo said, highlighting that the employment rate is also at a historically high level.
Concerning the IMF's decision to cut the growth forecast of Asia's No. 4 economy by 0.2 percentage point next year, Choo said it is notable that the updated estimate still hovers above those of major advanced nations, including the U.S. and Japan.
"As long as the Middle East issue does not weigh down on our economy, it will improve in general down the road," Choo said. "South Korea is gradually moving out of the tunnel."
The IMF cut its growth projection for South Korea for 2024 to 2.2 percent from the earlier forecast of 2.4 percent as the faltering Chinese economy and the sluggish manufacturing sector have slowed down the global economy.
Nevertheless, the finance minister said that it is still too early to declare that all uncertainties have disappeared in light of the escalating Israel-Hamas conflict.
"(The conflict) can affect the global prices of raw materials and oil. So far, there are some partial responses from the market, but the issue is currently giving only limited impacts," Choo said.
The finance minister said the government is closely monitoring the situation and its impact on the economy and exports.
"If (global oil prices) remain at their current levels, the trend of consumer prices is not expected to undergo significant changes through the end of this year," Choo stated. "However, if they become highly volatile, this could have an impact on consumer prices." (Yonhap)
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