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South Korea's exports slump again as pandemic drags on
[SEOUL] South Korea's exports posted another double-digit decline in May in a sign of continuing pain from the coronavirus pandemic.
Overseas shipments fell 24 per cent from a year earlier, the trade ministry said Monday, compared with economists' forecast of a 25 per cent contraction. Chip exports, South Korea's biggest source of trade income, rose 7.1 per cent.
The second double-digit decline of the year underscores the pandemic's growing toll on South Korean exports, which serve as a barometer of global trade. While major trade partners like the US and Europe have started to lift lockdowns, the process is hampered by resurgent infections and caution among consumers and businesses.
Exports underpin South Korea's economy and their sharp decline has led the central bank to forecast the first economic contraction since the Asian financial crisis. To ease the brunt of the pandemic, the government is preparing its third supplementary budget and the Bank of Korea has cut its interest rates to a record low.
South Korean manufacturers' confidence has slid to the lowest since 2009 amid export woes. Some economists maintain optimism that tech industries will fare better amid the outbreak as people try to minimise public gatherings and turn more to online activities.
The outlook for South Korea's exports depends on China, its largest trade partner. China returning to normal life is supporting demand for South Korean goods, but any optimism will be temporary unless supported by a broader recovery in the global economy.
"The jump in chip sales appears to have to do with China ramping up its investments in digital infrastructure," said Park Sang-hyun, an economist for HI Investment & Securities in Seoul. "South Korea should continue to do better with chip exports as long as it manages to get along with both the US and China while they compete for technology hegemony."
Imports declined 21 per cent from a year earlier in May, leaving a surplus of US$436 million. South Korea in April posted its first trade deficit since 2012.
Exports to China have returned to pre-pandemic levels, the ministry said without figures in its initial statement. Shipments to the US and the European Union are expected to rebound once their outbreaks stabilise, the ministry added.
Accounting for 1.5 fewer working days in May compared with a year earlier, daily shipments were down 18 per cent.
Imports of capital goods including semiconductor equipment rose 9.1 per cent, the ministry said, calling it a sign that South Korean companies continue to operate production normally.