Korean economy gradually feeling pinch of rate hikes: KDI

• Published date: 08 March 2023
• Publication title: The Korea Times

Private spending and construction investment in Korea are gradually being affected by aggressive rate hikes amid high inflation, a state-run think tank said Wednesday.

The assessment came as the Bank of Korea maintained the benchmark interest rate at 3.5 percent in February while keeping the door open for a further increase down the road. The bank carried out seven straight rate hikes between April last year and January.

"Consumption is gradually slowing down, with retail sales remaining stagnant and the growth of service production decelerating," the Korea Development Institute (KDI) said in its monthly report.

In January, retail sales, a gauge of private spending, decreased 2.1 percent on-month due to weaker demand for semidurable goods and food.

A slump in the real estate market due to high-interest rates has dampened investment in construction, it added.

Separate data compiled by the finance ministry showed the number of houses traded in December came to 28,603, down 46.8 percent from a year earlier, as more people refrained from purchasing new homes amid...