A state-run think tank says South Korea's economy is recovering thanks to a rebound in the service sector.
This comes as eased distancing measures increased related activities.
However, the pace has been limited due to geopolitical uncertainties.
Shin Se-byuck helps us look beyond the numbers
South Korea's economy continues to recover thanks to eased COVID-19 measures but does so at a limited pace due to external factors.
According to the Korea Development Institute on Thursday, South Korea is seeing improvement on the back of growth in in-person services such as accommodation and transport.
Data shows that service output in May increased 7.5 percent from the previous month.
In particular, recreation saw the highest month-on-month growth at 31.9 percent, followed by accommodation and food services at 20 and a half percent.
This also aided employment recovery.
In May, the number of people in employment increased by 70-thousand from the same month last year and around a third of them came from the service industry largely led by a revival of business in accommodation or food.
But, despite positive figures in the service sector, recovery momentum is weakening in manufacturing due to geopolitical uncertainties, such as the war in Ukraine and tightening monetary policies in major economies.
In May, all industry production rose 7.1 percent from April, but growth reported in semiconductor and electronic parts industries.. slowed the pace.
Electronic parts decreased by 13.8 percent and chips were down by 1.7 percent.
Meanwhile, citing projected rate hikes by the U.S. and the Eurozone in July, the KDI has painted a grim picture of the global economic outlook.
One expert said such rate hikes may hinder the economy further.
"Higher interest rates mean that consumption has a higher opportunity cost. This makes people spend less. But the problem here is that this will also lead to higher production costs, and consumers will eventually see higher sticker prices."
Amid increasing expectation that the Bank of Korea may take a "big-step" hike of 50 basis points this month the expert added the recovery will be limited for a while unless the geopolitical instability settles.
Shin Se-byuck, Arirang News.