How serious is it?… I sold it for 20,000 won today. It’s Korea.

Lotte Department Store in Sogong-dong, Seoul on the 15th, when the last department store regular sale period of the year began. /Reporter Lee Sol”/>

A customer is shopping for winter clothes on sale at the main branch of Lotte Department Store in Sogong-dong, Seoul on the 15th, when the last department store regular sale period of the year began. /Reporter Lee Sol Namdaemun Market in Seoul on the morning of the 15th. As I entered the market, I noticed that there were many stores that were run by the owner alone and without customers. Park Mi-young (64), a blanket store employee, said, “Business is not going well, so I voluntarily returned a third of my salary. The store opens at 9 a.m., but there are many days when I cannot sell items until 12 noon.” .

The situation was no different at the underground shopping center in Myeong-dong, Seoul this afternoon. Yang Yoon-seok, who runs an optical shop, said, “Today, all I sell is 20,000 won sunglasses to foreigners.” He added, “Business has been down since May of this year, and sales have decreased even more than during the COVID-19 pandemic.”

As industries closely related to domestic consumption continued to show sluggish trends across the country, an ’emergency light’ was turned on for economic recovery. In the government’s monthly economic diagnosis, the expression ‘signs of domestic demand recovery’ disappeared after 7 months. The phrase ‘economic recovery trend’, which has been included in economic diagnoses, has retreated to ‘slow economic recovery’.

◆Prolonged slump in domestic demand

The Ministry of Strategy and Finance said in the November issue of ‘Recent Economic Trends (Green Book)’ that day, “Recently, our economy is continuing a gradual economic recovery amidst expanding price stability, but there are uncertainties due to changes in internal and external conditions.” What is noteworthy in this economic trend is that the expression ‘signs of domestic demand recovery’, which has been appearing in economic diagnoses since last May, has disappeared. This is interpreted to reflect the fact that, except for facility investment, among domestic demand indicators, no clear recovery trend is observed. Retail sales recorded negative numbers for three consecutive quarters until the third quarter compared to the previous quarter. The decline rate in construction investment expanded from -1.7% in the second quarter of this year to -2.8% in the third quarter. Domestic credit card approvals in October increased by 1.2% compared to the same period last year. This is the lowest rate of increase in 15 months since July of last year (0%). An official from the Ministry of Strategy and Finance said, “The trend of domestic demand recovery itself has not changed,” and “As internal and external uncertainties increase, domestic demand will also be affected in some ways.”

◆Unstable economic flow

The problem is that not only domestic demand but also exports, which were considered the backbone of the Korean economy, are faltering. According to the Bank of Korea, exports in the third quarter (-0.4%, compared to the previous quarter) recorded a negative number for the first time in 1 year and 9 months. As a result of this, real gross domestic product (GDP) in the third quarter of this year only increased by 0.1% compared to the previous quarter. The level is far below the Korean government’s expectations (0.5%).

The resulting sense of economic crisis was fully reflected in the Ministry of Strategy and Finance’s economic trends. Instead of the existing phrase ‘economic recovery trend’, ‘slow economic recovery’ appeared, and the expression ‘export-centered recovery’ disappeared.

A slowdown in recovery can also be detected in the National Statistical Office’s business cycle clock, which shows the state of the domestic real economy. As of September, 6 out of 10 economic indicators were found to be in a downward or slowing phase. Exports have remained in a slowdown phase for four months, and the service industry production index, construction amount, number of employed people, business survey index, and consumer expectations index have been in a downward phase.

Changes in the trade environment have also emerged as a key variable following the inauguration of the second term of the US Donald Trump administration early next year. There are concerns that if the Trump administration’s high-intensity tariff policy becomes a reality, exports will also enter a downward phase in the business cycle clock.

Reporter Park Sang-yong/Ra Hyun-jin yourpencil@hankyung.com