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| Containers are stacked at a pier in the southeastern port city of Busan, Oct. 11. Yonhap |
Halloween tragedy feared to have negative impact on economy
By Lee Min-hyung
The real economy is feared to suffer a prolonged triple whammy of declining industrial output, retail sales and facility investments, as global monetary tightening jeopardizes the nation's economic recovery, Statistics Korea said Monday.
This is the first time in two months since July that the economy has faced the triple declines. The authority raised the alarm about heightened economic uncertainties regarding prices and interest rates, saying that exports and domestic consumption may slow down further.
Experts also point out that the latest tragedy in Itaewon will pose a negative impact on the economy.
According to data from the statistics authority, industrial output fell by 0.6 percent in September from a month earlier. The figure reported declines for three consecutive months since July. The drop was attributable to weak semiconductor production caused by China's lockdown and sluggish growth in international demand.
Retail sales also failed to extend their upward momentum and ended up falling by 1.8 percent during the same period on base effects, as demand for food and beverages soared in August due to the Chuseok holiday which fell in early September.
Facility investments declined 2.4 percent in September on weak investments in semiconductor manufacturing facilities. But investments in transportation equipment increased by 11.5 percent during the same period.
Economists said the economy would remain stuck in the doldrums amid escalating recession fears ― triggered by additional key rate hikes.
"The economy will keep grappling with recession fears amid the widening interest rate gap between the U.S. and Korea, soaring prices and the possibility of additional rate hikes by the Bank of Korea," Yonsei University economics professor Sung Tae-yoon said.
The economist also pointed out that the economy will face a growing risk of entering a period of stagflation, a combination of high inflation and slow economic growth.
"The latest tragedy in Itaewon will pose a negative impact on the economy, but much more important is the possible aftermath of stagflation," he said. The tragedy in Seoul's Itaewon left at least 154 people dead. Other planned Halloween events have mostly been canceled after the incident, triggering concern that this would negatively impact consumption. According to the LG Economic Research Institute, the 2014 ferry Sewol sinking that killed 304 people had a notable impact on consumption, including credit card spending and dwindling expenditures on leisure activities such as travel and sports.
Other experts also said Korea's GDP growth would lose momentum for growth gradually until the end of the year on weakening consumption.
"Consumption remained solid until the third quarter of this year, as more people expanded consumption activities," Korea Capital Market Institute economist Kang Hyun-ju said. "But this will not be long-lasting. My view is little momentum is detected to rev up the GDP growth here due to rising prices and rate hikes. Households' consumption will also shrink in the fourth quarter due to the macroeconomic uncertainty."
"The economy is showing signs of improvement in service sectors, but uncertainties escalate amid sluggish growth in exports and manufacturing businesses," Eo Woon-sun, an official from the statistics agency, said.
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