South Korea is facing growing economic uncertainties stemming from the general global slowdown and inflationary pressure at home, the Ministry of Strategy and Finance said Thursday."The economy is being confronted by worldwide financial woes, increased volatility in the domestic and overseas financial markets, and high consumer price gains," the ministry said in its monthly "green book" report on the latest economic conditions at home and abroad.
Greece's possible default and the spread of Europe's fiscal crisis as well as gloomier outlook for both the U.S. and Chinese economies are all fueling concerns, it said.
The ministry said that such developments can lead to liquidity problems in some leading European banks, fuel downside risks for U.S. financial institutions, and can adversely affect the global financial market.
In addition, the latest report showed that while improved supply of agricultural products has helped stem spikes in consumer prices that reached a three-year high of 5.3 percent in August, numbers still remained high.
Last month, the country's consumer price index rose 4.3 percent and marked the ninth straight month that inflation numbers exceeded the government's annual inflation target of 4 percent.
On the domestic front, the ministry said employment and the service sector were doing well along with exports, the main engine of South Korea's economic growth.
"Export growth is expected to be maintained at around 20 percent," the ministry said.
It, however, added that while better employment figures may contribute to a rise in retail sales, overall uncertainties will likely limit any serious gains.
On the current account situation for September, the ministry predicted steady export gains to the United States, European Union and the Association of Southeast Asian Nations will contribute to a favorable balance vis-a-vis August.
The ministry, meanwhile, said that it is keeping close tabs on all economic developments so it can take measures to control inflationary pressure and maintain the country's growth momentum.
It stressed every effort will be taken to regulate the household debt problems and strengthen the overall health of the economy.