South Korea's finance ministry on Thursday expressed worry about weaker private consumption and facility investment on political turmoil caused by the scandal involving President Park Geun-hye.
The ministry said in a monthly economic assessment report, called Green Book, that its economy showed slowing recovery and overall sluggishness in production and investment while expanding downside risks such as weaker sentiment on consumption and investment.
It said recent political situations of the country may expand downside risks to private consumption and corporate investment amid the lingering external uncertainties such as the new U.S. administration and the expected U.S. rate hike.
U.S. President-elect Donald Trump is forecast here to renegotiate free trade agreement (FTA) with South Korea that already took effect, while rearranging military alliance with its Northeast Asian ally to increase cost burden on South Korea for U.S. troops stationed in the country.
The U.S. Federal Reserve is expected to hike interest rates later this month, putting pressures on the Bank of Korea (BOK), South Korea's central bank that has cut its policy rate from an all-time low of 1.25 percent in June this year.
Adding to the uncertainties, political unrest caused by the presidential scandal boosted concerns about the already sagging South Korean economy. South Korean lawmakers are set to vote on a bill to impeach President Park over the scandal involving herself and her longtime confidante, Choi Soon-sil who has been charged with abuse of power and extortion.
The country's production in mining and manufacturing industries fell 1.7 percent in October from the previous month on the discontinuation of Samsung Electronics' Galaxy Note 7 smartphone on global reports of the devices catching fire and overheating.
Service industry production declined for two months in a row through October, and facility investment shed 0.4 percent. Retail sales, including reflect private consumption, weakened as seen in soft revenue in department stores and discount outlets in November.
The November exports rebounded in three months by growing 2.7 percent from a year earlier, but it was mainly attributed to one-off effects such as more business days. Job creation among manufacturers reduced 115,000 in October from a year ago.
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