South Korea's Jan exports seen falling faster on Lunar New Year, coronavirus to add strains: poll

[SEOUL] South Korea's exports are expected to fall at a faster pace in January, mainly due to fewer working days around the Lunar New Year holiday and amid concerns the new coronavirus may weigh on a fragile economic recovery, a Reuters poll showed on Wednesday.

Shipments in January were expected to dip 7.8 per cent from a year earlier, extending the contraction to a 14th consecutive month, according to the median forecast of 13 economists polled. Exports fell 5.2 per cent in December.

There were 21.5 working days in January this year because of the Lunar New Year holiday from Jan 24 to 27, providing the month with 2.5 fewer working days than last year. The holiday fell in early February last year.

Beyond the calendar effect expected in January's data, however, most economists see exports growth turning positive in February amid signs of recovery in chip sales and Chinese demand.

"The decline in exports will likely widen in January from the previous month on fewer working days, but the export growth will turn positive in February due to opposite base effect," said Park Sung Woo, economist at DB Financial Investment.

Preliminary data showed South Korea's exports in the first 20 days of January fell 0.2 per cent from a year earlier, marking the smallest decline in a year, on better chip sales.

But analysts see the contagious virus possibly piling more pressure on the trade-reliant economy.

The virus, originating in the Chinese central city of Wuhan at the end of last year, has spread to the United States, Japan, Canada, France and Germany among others. It has killed more than 100 people.

"Though we expect exports growth to turn positive in February, the rebound is unlikely to be strong given the possibility of a temporary slowdown in Chinese demand over the virus," said Park Sang Hyun, chief economist at Hi Investment & Securities.

"The development of the virus will serve as an important variable for recovery in South Korea's exports going further," Mr Park added.

On Tuesday, South Korea's finance minister vowed to stabilise financial markets should market volatility worsen, adding that the outbreak may hit the nation's exports and economic growth.

In the same poll, 11 economists separately expect South Korea's consumer prices to rise a median 1.1 per cent in January on-year, faster than a 0.7 per cent gain in December.

Economists also saw industrial output in December rising a seasonally adjusted 0.5 per cent from a month earlier.

Industrial output and trade data are due to be released on Friday and Saturday, respectively, while inflation data will be out on Feb 4.

REUTERS