South Korea’s exports are expected to post negative growth this year in the wake of an economic slowdown in its major trade partners including China, officials and experts said Tuesday.
Exports account for about half of the nation’s gross domestic product. And the volume, including intermediate goods for processing trade, shipped to China accounts for 25 percent of Korea’s total exports.
The nation’s central bank and some private think tanks expect the 2015 exports to drop by 4 percent to 6 percent, compared to last year.
The Bank of Korea predicted in July that the exports are estimated to fall by 4.3 percent on-year. It may further revise down the outlook in the next monetary policy committee meeting in October, according to bank officials.
LG Economic Research Institute has revised down its annual export growth outlook from -4.7 percent (in July) to -6.3 percent (in September).
The negative growth will be the first time in three years since exports fell 1.3 percent in 2012 on-year. In addition, the extent of negative growth will mark the highest since the record -13.8 percent in 2009.
LGERI said in its report that the second-half export performance will further deteriorate. While the first-half exports dropped 5 percent compared to the same period of 2014, it is expected to fall by 7.4 percent in the second half, it said.
“Though the U.S. and Europe are showing symptoms of economic recovery, service and domestic demand-oriented sectors are leading their growth — which is not very beneficial to Korea’s exports,” said an institute research fellow.
He said the seriousness lies in the decreasing trade volume with emerging countries, including China.
According to Korea Customs Service, exports for the first 20 days of September came to $27.67 billion, down 6.4 percent over the corresponding month of last year.
With that pace, third-quarter exports are estimated to post around $130 billion, which would be the lowest in 19 quarters since the performance stood at $128.7 billion.
The government is pinning hopes on the fast implementation of the free trade deal with China to overcome lackluster exports.
Deputy Prime Minister and Finance Minister Choi Kyung-hwan recently asked the ruling Saenuri Party to make full-fledged efforts to ratify the motion on the Korea-China FTA during the National Assembly’s plenary session, which will run through December.
In an economy-related ministers’ meeting Tuesday, Choi did not comment on the export sector, though he stressed that private consumption is improving.
The minister had shared his view with private analysts that China’s devaluation of its currency could undermine price competitiveness of Korean export items on the global stage.
By Kim Yon-se (kys@heraldcorp.com)
