South Korea’s exports to fall for third month on weak China demand

SOUTH Korea’s exports will likely extend their falling streak in December, a Reuters poll showed on Wednesday (Dec 28), with demand from China yet to recover on loosened Covid-19 restrictions.

The median forecast of 12 economists projected that the country’s outbound shipments will fall 10.1 per cent from the same month a year ago. This would be the third consecutive month of year-on-year declines, after a 14 per cent loss in November, which was the biggest in 2 ½ years, and a 5.8 per cent dip in October.

Park Sang-hyun, chief economist at HI Investment and Securities, said: “South Korea’s exports are under pressure from declining exports to China, where the economy still remains sluggish even after the easing of its Covid-19 restrictions, and weak sales of IT products, mainly semiconductors.”

“Moreover, the global economic slowdown is materialising, so exports are likely to continue the falling trend for the time being.”

China eased some of its most stringent restrictions to fight Covid-19 last month.

During the first 20 days of December, South Korea’s exports shrank 8.8 per cent from the same period a year ago. Those to China dropped 25.5 per cent, in what is likely to be the metric’s seventh consecutive falling month. The drop outweighed gains in US- and EU-bound shipments.

Meanwhile, imports were expected to fall at a much milder pace of 0.6 per cent in December, ending a 24-month gaining streak through November.

Altogether, South Korea’s trade balance is set to remain in deficit for a ninth consecutive month. It is also on track for the first annual shortfall in 14 years, and will be the largest of all time.

The survey also forecast the country’s consumer price index for December to be 5 per cent higher than a year ago, the same as in November, when the annual inflation rate hit a seven-month low.

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On factory output, economists expected production to fall 0.8 per cent on a seasonally adjusted monthly basis. This would be slower than the 3.5 per cent decline in October, and the slowest in the past five months.

Full monthly trade data is scheduled for release on Jan 1.