South Korea’s exports continued to decline last month in a sign of cooling global demand as higher interest rates weigh on consumption.
Overseas shipments dropped 9.5 percent from a year earlier, compared with economists’ forecasts for an 11.1 percent decline, and imports fell 2.4 percent, data released yesterday by the South Korean Ministry of Trade, Industry and Energy showed.
The trade shortfall was US$4.7 billion last month, resulting in the first annual deficit since the global financial crisis, as elevated oil prices battered many trade-dependent nations.
Photo: Reuters
South Korean exports are a major barometer of global commerce and tech demand as the nation produces key items such as chips, displays and refined oil.
Trade resilience has been a key source of reassurance for the Bank of Korea that the economy could withstand higher borrowing costs even as it tightened policy over the past year.
However, the cycle of interest rate hikes is likely close to ending as the central bank becomes more concerned about growth with the world economy slowing.
South Korean exports last year increased 6.1 percent, while imports rose 18.9 percent. The contraction in monthly shipments began in October, with weaker chip demand leading the decline.
Semiconductor sales plunged 29.1 percent from a year earlier last month, the fifth straight monthly drop, the trade ministry said.
Chipmakers are adjusting to the slackening demand, and cut production in November by the most since 2009.
Elevated inflation, China’s emergence from “zero COVID-19” and Russia’s invasion of Ukraine are among other factors complicating the outlook for trade.
Labor strife is another factor that could hit the economy, as workers express discontent fueled by soaring prices. A nationwide truckers’ strike weighed on South Korea’s supply chains before ending last month.
Exports would likely fall 4.5 percent this year and imports could decline 6.4 percent, the South Korean Ministry of Economy and Finance said.
Rivalry between the US and China over semiconductor hegemony poses a longer-term threat to South Korea whose trade depends heavily on momentum in global memory chip sales.
China’s struggle with nationwide COVID-19 outbreaks has also disrupted South Korea’s overseas shipments. Exports to China fell 27 percent year-on-year last month, while shipments to the US increased 6.7 percent, the trade ministry said.
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