S.Korea’s trade outlook dismal in Feb with stagnant exports

South Korea’s trade deficit in just the first 40 days of this year inched close to 40% of its worst-ever annual deficit last year amid a continued fall of its mainstay export item semiconductors, and to its biggest trading partner China, raising concerns over the export-dependent country’s economy this year.

According to data from the country’s customs agency on Monday, exports from Feb. 1 to 10 reached $17.6 billion, up 11.9% from the same period a year earlier. Over the same period, imports grew 16.9% to $22.6 billion, resulting in a trade deficit of $4.9 billion.

Average daily exports over the same period, however, dropped 14.5%, with the number of working days up two days from last year to 8.5 days.

The cumulative trade deficit from Jan. 1 to Feb. 10 widened to $17.6 billion, already reaching 37% of last year’s total deficit of $47.2 billion, which had marked the worst-ever annual trade deficit for Asia’s fourth-largest economy since the agency started compiling data in 1965.

SLUGGISH CHIP EXPORTS, CHINA SLUMP

The country’s exports remained stagnant this month after extending their losing streak for the fourth month in a row in January, mainly due to a continued fall in outbound shipments of its mainstay export item semiconductors.

Chip exports from Feb. 1 to 10 contracted 40.7% on-year, spurring concerns that outbound shipments would stay in the red for seven straight months in February.

Shipments of petroleum products and automobiles, however, grew 28.8% and 166.8%, respectively, over the same period.

Exports to Korea's biggest trading partner China also declined 13.4% over the same period, while those to Taiwan and Hong Kong contracted 22.8% and 42.8%, respectively. Shipments to the US, the EU and Vietnam jumped 48.0%, 53.3% and 2.3%.

The total deficit in trade with China from Jan. 1 to Feb. 10 reached $156 million, with shipments to the Greater China region on a downward trend for the eighth month in a row in January.

RECESSION FEARS GROW

The latest trade data further fanned recession fears for the Korean economy, which relies heavily on exports, with no sign of an immediate recovery in global demand.

The Bank of Korea in November revised down its growth forecast for the country’s gross domestic product for 2023 to 1.7% from the previous projection of 2.1%, citing sluggish exports.

In the fourth quarter of 2022, the local economy contracted 0.4% on-quarter, its first decline in two and a half years.

The central bank will hold this year’s second monetary policy meeting on Feb. 23 to make a rate decision. It is widely expected to leave the rate unchanged at the current level of 3.5%, following a quarter percentage point hike in January, as data indicate a rapid cooldown in the country’s economy.

Write to Jin-gyu Kang at josep@hankyung.com
Sookyung Seo edited this article.