Seoul, Feb 10 South Korea's economy is faced with increased downside risks due to an anticipated global trade war centred around the United States, while production remains modest amid a prolonged slump in the construction sector, a state-run economic think tank said on Monday.
"Recently, our economy has seen a modest growth in production while worsening external conditions have heightened downside risks," the Korea Development Institute (KDI) said in a monthly economic assessment report.
The KDI cited heightened concerns over the latest U.S. tariff policies, reports Yonhap news agency.
U.S. President Donald Trump, who began his second term last month, has announced plans to impose steep tariffs on major trading partners in his efforts to address America's trade deficits and achieve other policy goals.
The think tank noted that South Korea's manufacturing sector has modestly improved, driven by strong semiconductor and automobile production, but the construction sector continues to decline.
"Domestic demand recovery, particularly in consumption and construction investment, has been delayed, and the strong export growth is gradually slowing down, except in the semiconductor sector," the KDI said.
According to government data, South Korea's exports, one of its key economic growth engines, declined in January for the first time in 16 months.
The KDI also pointed to weakening retail consumption and rising delinquency rates among small business owners as additional concerns.
Meanwhile, sluggish growth in South Korea's industrial output is hampering the country's overall economic recovery amid increased uncertainties, which have been further exacerbated by domestic political instability.
"Our economy has recently seen a slowdown in industrial output growth delaying economic improvement, and heightened uncertainties have weakened economic sentiment," the KDI said in its monthly economic assessment report last month.
The think tank emphasised that economic sentiment has further deteriorated due to the domestic political situation, referring to President Yoon Suk Yeol's short-lived imposition of martial law on December 3 and his subsequent impeachment.
Disclaimer: This post has been auto-published from an agency feed without any modifications to the text and has not been reviewed by an editor