Raging Omicron feared to hamper private spending recovery: finance ministry

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Korea's economy is on a recovery path on the back of robust exports, but the fast spread of the Omicron variant of COVID-19 is feared to hurt any rebound in private spending, the finance ministry said Friday.

External economic uncertainties also heightened as oil prices have surged and volatility in the financial market has increased amid geopolitical risks between Russia and Ukraine, the ministry said in its Green Book, a monthly economic assessment report.

"Korea's exports have extended their robust growth and the number of employed people sharply rose. But the spread of the Omicron variant could (negatively) affect domestic demand," the report said.

Korea's daily virus cases surged to 100,000 for the first time Thursday amid concerns that the current wave has yet to reach its peak.

Despite the uptick in virus infections, the government decided to partly relax tough virus curbs to support small businesses hit hard by the pandemic.

Earlier in the day, the government decided to extend business hour curfews on restaurants and cafes by one hour to 10 p.m. while maintaining the cap on private gatherings at six. The measures will be effective starting Saturday until March 13.

The ministry said sales at department stores and online shopping rose and consumer sentiment improved in January despite the flare-up in virus cases.

Card spending went up 17.5 percent year-on-year last month, marking the 12th straight month of gains. Sales at department stores increased 31.5 percent; but domestic sales of autos fell 19.7 percent.

Private spending grew 1.7 percent in the fourth quarter of last year from three months earlier, a turnaround from a 0.2 percent fall in the third quarter, according to data from the Bank of Korea (BOK).

Korea faces growing inflationary pressure amid soaring energy costs and the economic recovery.

In January, consumer prices rose 3.6 percent from a year ago, compared with a 3.7 percent gain in December last year, as inflation grew more than 3 percent for the fourth straight month. The BOK aims to keep annual inflation at 2 percent over the medium term.

Tensions between Russia and the U.S. over Ukraine have driven up already high oil prices. Russia is one of the largest oil producers.

Dubai crude, Korea's benchmark, soared to $93.05 per barrel Tuesday, up from $77.12 at the end of last year. Korea depends mainly on imports for its energy needs. (Yonhap)