Government Sees Export Boom, but Inflation and Employment Concerns Rise Amid Middle East Uncertainty

June Edition of the Green Book: Recent Economic Trends
Positive Assessment of Export Boom Led by Semiconductors

The government has diagnosed that the ongoing export boom, particularly centered on semiconductors, is sustaining the momentum of economic recovery. However, it identified inflationary pressures resulting from the Middle East conflict as a factor burdening people's livelihoods.

According to the June edition of the "Recent Economic Trends (Green Book)" published by the Ministry of Economy and Finance on June 12, "Recently, the Korean economy has continued its recovery momentum, led by strong exports and improvements in consumer and business sentiment. However, ongoing uncertainties such as the Middle East conflict have raised concerns about inflation and a slowdown in employment, which could weigh on people's livelihoods."

The government gave a positive assessment of the increase in exports centered on semiconductors, as well as the improvements in consumer and business sentiment. Last month, exports rose by 53.2% compared to the same month last year, while average daily export value climbed by 60.7% to 4.28 billion dollars. The increase was led by expanded exports in computers (up 290.7%), semiconductors (up 169.4%), petroleum products (up 46.6%), and ships (up 16.7%).

In fact, there were signs of improvement in overall economic sentiment. The Consumer Sentiment Index (CSI) rose by 6.9 points from the previous month to 106.1 last month. The Corporate Business Survey Index (CBSI) increased by 4.0 points to 98.9, and this month's outlook index also climbed by 3.7 points to 97.6. However, both indices remained below the baseline of 100, indicating that a cautious outlook on economic recovery persists.

Following U.S. President Donald Trump’s signing of a proclamation to impose an unconditional 25% tariff on steel and aluminum products imported into the United States, and his announcement that tariffs on automobiles and semiconductors are also under consideration, export vehicles are waiting to be loaded at Pyeongtaek Port, Gyeonggi Province on February 13, 2025. Photo by Jinhyung Kang.

Key real economic indicators weakened somewhat. According to the April industrial activity trends, overall industrial production fell by 0.6% from the previous month, as manufacturing, services, and construction production all declined. Both facility investment and retail sales also dropped by 3.6% compared to the previous month.

Inflationary pressures have intensified. Last month's consumer prices rose by 3.1% year-on-year, a greater increase than April's 2.6%. The living cost index also rose by 3.3%. Notably, due to the Middle East conflict, the rate of increase in petroleum product prices expanded from 21.9% in April to 24.2% last month.

The impact of rising international oil prices also continued. The price of Dubai crude oil fell slightly from 105.7 dollars per barrel in April to 103.2 dollars per barrel in May, but domestic gasoline prices rose from 1,986 won to 2,011 won per liter. Diesel prices also increased from 1,979 won to 2,006 won per liter.

Employment has shifted to a downward trend. The number of employed persons last month decreased by 40,000 compared to the same month last year, turning negative from the increase of 74,000 in April. The unemployment rate rose by 0.1 percentage point to 2.9% year-on-year. The economically inactive population increased by 264,000 year-on-year, while the labor force participation rate fell by 0.4 percentage point to 65.2% compared to the same month last year.

The government assessed that the global economy is maintaining a moderate growth trend, but the effects of the Middle East conflict are heightening volatility in international financial markets and energy prices, while also leading to persistent concerns over supply chain disruptions, rising inflationary pressures, and a slowdown in economic growth.

The government stated, "In order to minimize the impact of the Middle East conflict, we will maintain an emergency economic response system and swiftly execute supplementary budgets for high oil price relief payments. At the same time, we will make every effort to stabilize people's livelihoods through supply management of key items and price controls."

This content was produced with the assistance of AI translation services.