South Korea’s exports slump persisted in February, clouding the outlook for an economy already weighed down by high interest rates and elevated inflation.
(Bloomberg) — South Korea’s exports slump persisted in February, clouding the outlook for an economy already weighed down by high interest rates and elevated inflation.
Working-day shipments on average decreased 15.9% from a year earlier, the biggest decline since June 2020, according to data released Wednesday by the customs office. Headline exports dropped 7.5%, compared with economists’ forecasts for an 8.8% decline.
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.
The slump in exports is eroding confidence in Korea’s ability to rebound from an economic contraction last quarter.
Trade forms an integral part of South Korea’s economic makeup and has been under pressure from global central bank tightening and high energy prices. But a decline in demand for Korean semiconductors is a major cause of the downturn.
China, which is the nation’s biggest export destination, has also yet to recover fully from its Covid restrictions.
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.
Korean exports serve as a key barometer of global trade as the nation sells items such as chips, displays and refined oil that straddle supply lines. Korea is home to some of the world’s biggest semiconductor and smartphone makers, including Samsung Electronics Co.
–With assistance from Heejin Kim.
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