South Korea's government upgraded its assessment of the economy Friday, saying surging exports and improving domestic demand were sustaining a "solid recovery."

South Korea's economy is showing solid signs of recovery, supported by robust exports, the finance ministry said Friday. In this Sept. 1 photo, containers are stacked at a port in the southeastern city of Busan. File Photo by Yonhap UPI

SEOUL, Sept. 11 (UPI) -- South Korea's government upgraded its assessment of the economy Friday, saying surging exports and improving domestic demand were sustaining a "solid recovery," despite heightened uncertainty from the Middle East war and U.S. tariffs.

"Recently, our economy has continued to show a solid recovery, with exports increasing sharply and domestic demand, including consumption, improving," the Ministry of Finance and Economy said in its monthly economic assessment, known as the Green Book.

The ministry revised its language from August, when it said the recovery was "strengthening."

At a press briefing Friday, Lim Hong-gi, director of the ministry's Economic Analysis Division, said the change reflected signs that the economy "has moved up to a new level, driven by rapid and strong growth momentum."

Lim noted that the economy recorded virtually no quarter-over-quarter growth from the second quarter of 2024 through the first quarter of 2025, but has recovered rapidly since. It is now settling at that higher level, he said, with the solid growth trajectory likely to continue into next year unless external conditions take a turn for the worse.

South Korean exports jumped 68.7% in August from a year earlier, led by strong shipments of semiconductors, computers and cosmetics, the Green Book said. Average daily exports, adjusted for the number of working days, rose 72.5%.

The export boom showed signs of accelerating this month, with shipments during the first 10 days of September soaring 82.6% year over year, preliminary Customs Service data released Friday showed.

The ministry also raised its level of caution over external conditions, saying uncertainty related to the Middle East war and U.S. tariff measures had "somewhat increased."

Lim said government price caps on petroleum products should limit the immediate impact of higher crude prices and keep inflation in check.

"Although international oil prices have surpassed $100, the initial impact will not be significant because we have capped petroleum product prices," he said. "Barring any major unforeseen developments, we expect to meet our annual consumer inflation forecast of 2.7%."

The ministry also cited difficult employment conditions among vulnerable groups and struggling industries, although the number of employed people increased by 184,000 year over year in August.

Recent consumption indicators were mixed. Retail sales fell 2.4% in July from the previous month and 0.8% from a year earlier, while facility investment rose 7.5% month over month and 24.9% annually.

Lim acknowledged that domestic demand was recovering more slowly than exports and investment but said it had gradually improved since bottoming out early last year.

"The pace of the recovery is not satisfactory, but it is getting better little by little," he said.