Korea exports down the most in 3 years; BOK may keep rates

South Korea’s exports declined at their steepest pace in more than three years last month, data showed on Tuesday, adding to expectations that the central bank may leave interest rates unchanged as Asia’s fourth-largest economy is yet to show enough signs of recovery.

Exports fell 16.5% to $50.3 billion in July from a year earlier, the largest drop since May 2020, according to the Ministry of Trade, Industry and Energy. The country’s overseas sales skidded for the 10th straight month.

A slow global economic recovery, the sluggish semiconductor industry and the summer vacation season hurt overall exports, the ministry said.

Imports slipped 25.4% to $48.7 billion on-year, resulting in a trade surplus of $1.6 billion.

The data raised expectations that the Bank of Korea may not raise its policy interest rate from the current 3.50% although the monetary authority last month kept the door open for another hike, analysts said.

Government bond yields fell across the board with the highly liquid three-year debt yield down 3.4 basis points to 3.727%, according to the Korea Financial Investment Association.

SEMICONDUCTOR EXPORTS TUMBLE

Overseas sales of semiconductors, South Korea’s top export item, tumbled 33.6% to $7.4 billion with memory chip sales down 41.7%. The country is home to the world’s two largest memory chipmakers -- Samsung Electronics Co. and SK Hynix Inc.

Sales to key markets including the US, China and Southeast Asia slid.

Exports to China, South Korea’s largest overseas market, fell 25.1% to $9.9 billion, extending their losing spree to the 14th consecutive month. The country logged a trade deficit of $1.3 billion against the mainland, suffering a loss for the 10th straight month.

Sales to the US, the world’s largest economy, dropped 8.1% to $9.3 billion, while shipments to the Association of Southeast Asian Nations (ASEAN) skidded 22.8% to $8.8 billion.

On the other hand, automobile exports grew 15% to $5.9 billion on strong demand for electric vehicles and sport utility vehicles in key markets such as North America and Europe, the ministry said. Overseas sales of EVs surged 69.5% to $1.4 billion.

Write to Han-Shin Park at phs@hankyung.com
 

Jongwoo Cheon edited this article.