South Korea’s early trade data show export momentum still robust
SOUTH Korea’s early trade data showed that exports are continuing to grow at a double-digit clip, boosting the prospects for an acceleration in economic growth this year.
The value of shipments adjusted for working-day differences increased 17.7 per cent from a year earlier in the first 20 days of May, according to data released on Tuesday (May 21) by the customs office. Unadjusted exports rose 1.5 per cent, while overall imports decreased by 9.8 per cent, resulting in a trade shortfall of US$304 million.
South Korea posted a 1.3 per cent economic expansion in the first quarter from the previous three-month period, with a robust recovery in exports among factors leading the way. That performance, which soundly exceeded the 0.6 per cent forecast, will likely prompt the Bank of Korea (BOK) to raise its economic growth forecast for the year from 2.1 per cent when the board convenes later this week.
Strong exports can add to the rationale for the central bank to hold its policy rate elevated for longer. The BOK is widely expected to keep its benchmark rate steady at 3.5 per cent, a level it has described as restrictive, when officials set policy on Thursday.
Semiconductors from South Korea and other Asian economies have especially been in demand as prices pick up on orders from smartphone makers, data-centre operators and artificial intelligence developers. A strong US economy has also helped offset a slump in demand from China.
“Strong semiconductor demand should further lead to outperformance of the manufacturing sector and a gradual recovery of facilities investment in the rest of this year,” Citi Research said.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
There are still downside risks for South Korea’s growth. Credit concerns persist as developers struggle with debt that piled up during a pandemic-era construction boom. Meanwhile, China, South Korea’s biggest trading partner, has yet to rebound fully from a spending slump as its housing slump continues to weigh on activity.
The exchange rate remains a source of concern as South Korea relies heavily on imports of energy and raw materials to assemble products for export. The won has been one of Asia’s worst-performing currencies this year along with Japan’s yen and Thailand’s baht.
While the elevated US dollar-won rate helps swell exporters’ earnings in local currency terms, it also is increasingly becoming a burden for those that rely on overseas manufacturing demand because a large portion of their debt is in foreign currencies, according to Lim Dong-min, an independent economist and columnist.
“It’s both good and bad for exporters, but overall it adds to uncertainties,” Lim said. South Korean firms are part of a wide range of global supply chains, especially in industries including semiconductors, automobiles and batteries. BLOOMBERG
Share with us your feedback on BT's products and services
