South Korea’s export slump deepened in February as slowing global demand and a plunge in chip prices weighed, clouding the outlook for an economy already hit by high interest rates and elevated inflation.
(Bloomberg) — South Korea’s export slump deepened in February as slowing global demand and a plunge in chip prices weighed, clouding the outlook for an economy already hit by high interest rates and elevated inflation.
Working-day shipments on average fell 15.9% from a year earlier, the biggest drop since June 2020, according to data released Wednesday by the customs office.
The slide in exports is eroding confidence in Korea’s ability to rebound from an economic contraction last quarter. It also points to an ongoing slowdown in global trade and tech-sector demand that will keep concerns smoldering over possible recessions in key economies.
Headline exports offered a less gloomy view, largely due to seasonal holiday factors that helped prop up the figures. The value of shipments dropped 7.5%, helped by more working days in February this year. Still, that was less than economists’ forecasts for an 8.8% decline and around half the decline in January.
Overall imports gained 3.6%, resulting in a trade deficit of $5.3 billion. Korea has reported a monthly shortfall since March last year as surging energy and commodity prices swelled import costs.
Shipments of semiconductors, the biggest contributor to Korea’s exports, plunged 43% from a year ago due to sharp falls in selling prices. Exports of automobiles jumped 47%, helping the nation trim the trade deficit from a record-high level in January.
Korea is home to some of the world’s biggest semiconductor and smartphone makers, including Samsung Electronics Co., making its export figures a key barometer of global trade.
Exports to China, South Korea’s biggest trading partner, dropped 24% on yearly basis, a chip shipments for mobile phones fell along with real-estate related machinery. Again, the figure benefited from a larger number of working days this February due to the earlier timing of Lunar New Year holidays.
Shipments to Japan slipped 4.9%, dragged down by petrochemical exports.
Worldwide demand is likely to remain weak as central banks continue their struggle against inflation and Russia’s war on Ukraine drags on. The Bank of Korea is keeping the option open of further tightening after raising its benchmark rate by 300 basis points since 2021.
Growing trade shortfalls are adding to pressure on the won, fueling concerns among policymakers about a rekindling of inflation as the nation relies heavily on imports of food and energy.
The BOK last week lowered its forecast for economic growth this year to 1.6% from 1.7%. A property-market downturn and trade weakness were among reasons cited for the reduction.
(Adds more details on export items and destinations)
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