The Korea Development Institute(KDI) has said downside risks to the economy have increased for the second consecutive month.

According to its February report on economic trends, released Monday, the institute said growth in production has remained modest and worsening external conditions are intensifying downside risks to the economy.

It added that the lingering economic impact of the martial law situation and the presidential impeachment are adversely affecting economic sentiment, combined with the increasing external uncertainties since the launch of the new U.S. administration.

The KDI emphasized that with interest rates remaining high and household sentiment weakening due to political instability, consumption continues to be sluggish with the consumer sentiment index for last month at 91-point-two, far below the baseline of 100.

It further noted that facility investment has started to recover, supported by increased investment in semiconductors, but construction investment remains weak.

The KDI also said continued sluggish domestic demand led to a slowdown in the employment growth rate.