A state run research institute has diagnosed that the Korean economy is maintaining a moderate recovery trend thanks to an increase in exports.
The Korea Development Institute (KDI) evaluated in the ‘July Economic Trends’ released on July 7, saying, “Recently, the Korean economy has temporarily adjusted production, but the demand for domestic and foreign goods continues to increase.”
According to KDI, production in all industries recorded a high growth rate of 7.3% in May compared to the same period of the previous year due to the base effect in most industries except for construction.
The disruption in the supply and demand of raw materials and intermediate goods put some restrictions on the construction and automobile industries, and the rise in raw material prices such as crude oil also became an obstacle, but it is evaluated that it did not dampen the economic recovery movement.
KDI emphasized that the economy appears to be recovering slowly, considering the high growth in exports. World industrial production and trade are increasing significantly, exceeding the levels before the outbreak of the novel coronavirus (COVID-19). Accordingly, Korea's exports continue to improve.
Korea's export growth rate in November last year increased by 3.9% compared to the same period of the previous year, entering a recovery phase. Since last April, it has continued to increase by 40% every month compared to the same period of the previous year.
KDI also diagnosed that expectations for economic improvement are rising as economic sentiment indicators such as the coincident economic index, leading index, and consumer sentiment index continue to rise.
However, KDI added that it is burdensome that the number of confirmed cases is rapidly increasing as the mutated Corona 19 virus is spreading in Korea.
KDI was concerned that there is a possibility that the economic recovery may be delayed in the future as the number of confirmed COVID-19 cases has increased significantly since the end of June.
News Sentiment Index (NSI)
The News Sentiment Index (NSI) is an economic sentiment index published every Tuesday by the Bank of Korea that calculates the economic sentiments of households and businesses appearing in economic articles.
Artificial intelligence (AI) categorizes and indexes the sentences of internet economy articles from 50 Korean media companies into 'positive', 'negative' and 'neutral', respectively, and calculates the NSI. If this index exceeds 100, it means that there were more positive sentences, and if it was below 100, there were more negative sentences. The higher the NSI is 100, the better the economic sentiment of households and companies.
The Bank of Korea first announced the NSI on April 6th. According to the BOK, the NSI in June was 127.4, down 3.1 points from the previous high in May. On a daily basis, the highest record was 134.51 on May 5th.
The BOK developed the NSI by referring to the 'News Sentiment Index' of the San Francisco Central Bank (Fed). The News Sentiment Index calculates the sentimental economy by analyzing the words of economic articles in 16 US newspapers, including the New York Times.
The BOK evaluates that the NSI not only shows a similar trend to the consumer sentiment index and the all-industry business due diligence index (BSI), but also captures changes in economic sentiment more quickly than these indices. In addition, the BOK explains that it shows a high correlation, leading by one to two months to major economic sentiment indicators (CCSI, ESI, CSI, BSI, etc.) and real economic indicators (leading composite index, GDP, etc.).
