South Korea’s exports plunged by a record one-third last month from a year earlier as demand dropped sharply in major overseas markets including China, the government said yesterday.
The worse-than-expected figure highlighted the damage the global economic downturn is doing to the export-dependent economy.
Exports last month reached US$21.7 billion, a year-on-year drop of 32.8 percent and the steepest decline since South Korea started announcing monthly tallies in 1980.
Imports decreased 32.1 percent to US$24.6 billion to leave a trade deficit of US$2.97 billion, the Ministry of Knowledge Economy said.
The ministry said exports of most products contracted, with automobiles down 55 percent, computers down 60 percent and consumer electronic goods falling 65 percent compared with the year before. Only ships saw an increase in exports, by 20 percent.
Exports to the country’s largest trade partner, China, fell 32 percent and those to the second largest, the EU, declined 47 percent. Shipments to the US and Japan fell 21.5 percent and 29 percent respectively.
The ministry said the Lunar New Year holiday and a halt in production by carmakers to reduce inventories worsened the figures.
Imports fell last month as demand for foreign consumer and capital goods fell more than 20 percent. But unusually cold weather caused imports of gas and coal to rise 51 percent and 62 percent last month from a year earlier.
The ministry said exports could continue to lose ground in the near future, with global trade volume likely to contract 2.8 percent this year from a gain of more than 4 percent last year.
Standard Chartered economist Chun Chong-woo said exports could slump almost 40 percent year-on-year in coming months.
“I expect exports to continue to fall around 30 percent during the first half, and they could even decline by near 40 percent,” Chun told Dow Jones Newswires.
South Korea is bracing for a possible recession after growth shrank 5.6 percent quarter-on-quarter in the final three months of last year, the largest contraction since the Asian financial crisis a decade ago.
Industrial production figures for December showed a year-on-year fall of 18.6 percent, the largest ever recorded.
The “extraordinarily bad numbers” indicate the country will suffer a deep recession lasting most of this year, Daniel Melser, senior economist with Moody’s Economy.com said in a commentary.
Melser forecast massive job losses in the manufacturing sector, which employs around 3.5 million out of a total labor force of about 16 million.
“Employment in the manufacturing sector could shrink by 15 percent [525,000 workers] over the course of this year,” he said. “And this is not even taking account of employment in all the satellite industries which leverage growth off the export sector.”
The government has announced extra spending and tax cuts worth billions of dollars to try to prop up the economy. Anoop Singh, regional director of the IMF, predicted that South Korea would likely post “substantially negative” growth this year but would turn around next year, depending on how fast global growth rebounds.
Singh told Yonhap News Agency he remained optimistic about Seoul’s long-term prospects, citing strong fundamentals and the government’s “comprehensive and forward-looking” approach to the global turmoil.
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