SEOUL, Dec. 7 (Yonhap) — The South Korean economy is on a modest recovery track, but it faces growing downside risks due to the spread of the new omicron COVID-19 variant, a state-run think tank said Tuesday.
The country’s service industry improved on the back of the vaccine rollout, but the recovery of the manufacturing sector was limited amid global supply chain bottlenecks, the Korea Development Institute (KDI) said in a monthly economic assessment report.
“Due to the spread of the omicron variant in recent weeks, downside risks are running high as countries take stricter preventive measures and financial markets grow unstable,” KDI said in the report.
Private spending improved as the country began implementing its “living with COVID-19” scheme with relaxed virus restrictions on Nov. 1 in a bid to gradually return to normal life.
Retail sales, a gauge of private spending, rose for the second straight month in October as economic activity increased amid the vaccine rollout, according to government data.
But a spike in virus cases and the emergence of the omicron variant prompted health authorities this week to toughen restrictions on private gatherings and tighten other quarantine measures.
South Korea added 4,954 new COVID-19 infections on Tuesday, bringing the total caseload to 482,310. It reported 12 more omicron infections, raising the total to 36.
The deteriorating virus situation casts doubts over the growth path of Asia’s fourth-largest economy as the recovery of domestic demand could be sapped.
The Korean economy grew 0.3 percent in the third quarter from three months earlier, slowing from a 0.8 percent on-quarter gain in the second quarter, according to central bank data.
Private spending retreated 0.2 percent on-quarter in the July-September period, compared with a 3.6 percent increase the previous quarter.
The Bank of Korea said the Korean economy is able to expand 4 percent this year only if the on-quarter economic growth reaches 1.03 percent in the fourth quarter.