According to data from the Korea Customs Service, South Korea’s exports continued to decline from January 1 to 20 this month, with chip exports alone dropping 34 percent, seen as the latest sign of a global economic slowdown.
South Korea’s exports fell by 2.7% to US$33.6 billion in January 1-20 compared to the same period last year, while imports increased by 9.3% to US$43.8 billion, resulting in a trade deficit of US$10.263 billion. However, the average daily exports, excluding the difference in working days, fell by 20% year-on-year.
The data showed that exports of chips, Korea’s main export, fell by 34.1 percent and steel exports by 11.2 percent, while exports to mainland China also fell by 24.4 percent.
The main reason for the decline in South Korea’s exports is the weakening demand for chips, and economists expect that the country’s economy may have contracted last quarter, partly due to the drag on exports. Trade performance will have a profound impact on the export-dependent Korean economy, central bank chief Lee Chang-Yong said this week that the decline in exports is one of his three biggest worries this year, the other two are the resurgence of oil prices and the housing market downturn.
South Korea’s trade outlook remains uncertain, the government estimates that exports will shrink by 4.5% for the year, the Korea International Trade Association (KITA) believes it will decline by 4%, while the central bank expects exports to recover in the second half of the year.
Looking at exports by item from 1 to 20 January, Korea’s exports of passenger cars (45.7%), petroleum products (18.8%) and wireless communications equipment (19.7%) all increased year-on-year, but exports of semiconductors (-34.1%) and precision equipment (-9.9%) all declined.
Meanwhile, Korea’s trade deficit of US$47.2 billion last year was the largest in 14 years since the global financial crisis in 2008. Following on from last year, the export situation is expected to be tougher this year. In its economic forecast report released last year, the Korea Trade Association predicted a 4 per cent drop in exports and a trade deficit of US$13.8 billion this year compared to the previous year, while the Korea Institute of Industrial Economics and Trade (KIET) forecast a 3.1 per cent drop in exports and a trade deficit of US$26.6 billion. The Korea Institute of Industrial Economics and Trade (KIET) said, “The decline in demand for IT (information technology) products due to the global economic slowdown has led to an increase in memory semiconductor inventories.”