The Korean economy continued to be weak in domestic demand, mainly for investment. Private consumption showed sluggish growth due to durable goods. Investment-related indicators dropped slowly, continuing the weakness. Amid lingering uncertainties over internal and external conditions, exports showed a slower decline. The global economy is facing continuing uncertainties such as the Euro area fiscal crisis and the US fiscal cliff, whereas some advanced economies maintained a moderate pace of recovery. The labor market showed the number of the employed grows at a higher rate, largely attributable to the base effect. Although CPI and core inflation rates rose marginally at 2.1% and 1.5% rates, respectively, they show relatively stable movement.
    Also, the report analyzed the impact of the US fiscal cliff on Korean economy. Automatic tax increases and spending cuts for year-end are already hindering economic growth. According to CBO, the fiscal cliff will drive the U.S. economy back into recession next year and economic output will drop by 0.5 percentage points in 2013 if the Congress fails to avert the tax hike and spending cuts that were put in motion by an earlier deficit agreement. With the realization of the US fiscal cliff, this report forecasts economic growth of 3.0% which slashes 0.5% points compared to the previous projection (3.5%).


Won Dongah