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S.Korea's economic recovery remains weak on soft exports, consumption

Xinhua, September 6, 2016 Adjust font size:

South Korea's economic recovery remains weak on the back of still lackluster private consumption and exports, a state-run think tank said Tuesday.

The Korea Development Institute (KDI) said in a monthly report that signs of overall economic recovery have yet to be detected amid slumping retail sales as well as faltering exports and facility investment.

The report said some economic indicators showed a modest growth that cannot lead to an overall recovery.

Industrial production in all industries increased 3.2 percent in July, but it was lower than a 4.8 percent expansion in the previous month.

Excluding ICT sector, production in the mining and manufacturing industries reduced 2.4 percent in July, with services industry production growing 2.7 percent in July after rising 5.4 percent in June. Facility investment tumbled 12.3 percent.

Retail sales gained 4.3 percent in July after expanding 9.0 percent in the prior month as temporary cut in consumption tax for cars ended at the end of June.

Auto sales by the country's carmakers in the domestic market reduced 10.6 percent in August from a year earlier.

Exports, which account for about half of the economy, grew 2.6 percent in August from a year ago, marking the first rebound in 20 months, but daily average exports declined 5.3 percent last month, bolstering concerns about the main growth engine of the export-driven economy.

The government had unveiled a supplementary budget plan worth 11 trillion won (10 billion U.S. dollars), but it was passed last Friday through the National Assembly more than a month after the proposal. It remains uncertain whether the fiscal stimulus could have a fully positive effect on the economy.

Bank of Korea is expected to refrain from cutting its policy rate further as the U.S. Federal Reserve is widely forecast to raise interest rate at least once within this year.

The bank lowered its benchmark interest rate by 25 basis points in June to an all-time low of 1.25 percent. Enditem