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Title NABO Economic Trends (No. 36)
Views 195 Date 2023-04-20

NABO Economic Trends (No. 36)



Published on April 20, 2023
Published by Population & Strategy Analysis Division



■ Economic Trends
   Concerns about a sluggish economy remain due to the cumulative trade balance deficits, despite the recent improvement in domestic demand.
   Domestic demand turned upward for the first time in four months, driven by a 5.3% MoM increase in retail sales in February. Facility investment (0.2%) also increased for the first time in three months; Value of Construction Completed (6.0%) saw an increase for the second consecutive month. On the other hand, difficulties in external transactions continued. March exports fell 13.6% YoY, demonstrating negative growth for six consecutive months and the trade balance came in at a deficit of USD 4.62 billion, a deficit of 13 months in a row. The cumulative trade deficit for the first quarter of 2023 is USD 22.5 billion, accounting for 47.7% of the annual deficit in 2022 (USD 47.2 billion). Consumer prices rose 4.2% YoY as they rose for all major items such as services, industrial goods, and electricity/gas/water, but the rate of increase narrowed MoM (4.8%).
   In February, the All Industry Production Index (AIPI) increased by 2.9% YoY, thanks to strong services, etc. While the service and construction industries had a climb of 7.2% and 22.4% YoY, respectively, manufacturing production fell by 8.2%. In particular, semiconductor production declined 17.1% MoM, a trend in which uncertainty continues. In March, the number of employed persons increased by 469,000 YoY, and the unemployment rate stood at 2.9%, continuing a favorable trend centering on the service industry and the elderly.
   n the financial markets, treasury bond yields and the won/dollar exchange rate fell thanks to eased uncertainties related to monetary austerity. As of the end of March, the three-year treasury bond yields were 3.3%, down 0.5%p MoM, and the won/dollar exchange rate recorded 1,304 won, down 1.0% MoM.


■ Pending Economic Issue 「Review of global trade issues in 2023 related to the climate change」
   With the prevailing consensus for the climate change, as a pretext for building a sustainable and fair trade system, the EU has raised carbon leakage as a global trade issue, and the US has implemented measures to counter the climate change by enacting its Inflation Reduction Act. The imposing of carbon trade barriers by major countries is increasing the burden on domestic exporting companies which rely heavily on manufacturing. Accordingly, Korea, needs to come up with comprehensive measures to redesign climate policy-related laws and regulations like the EU for the success of a sustainable green transition. In addition, it is necessary to put in place policies that are designed to protect SMEs that are vulnerable to green transition-related trade issues, and to prepare support measures so that the green capabilities of businesses can become their core competitiveness.