S. Korea exports slump for 8th month

Trade tensions, drop in demand for chips see exports shrink 11% in July from a year earlier

SEOUL • South Korea's exports tumbled for an eighth straight month in July, with persistently weak global demand and an escalating dispute with Japan painting an increasingly gloomy picture for Asia's fourth-largest economy.

Exports shrank 11 per cent last month from a year earlier, trade ministry data showed yesterday, largely in line with an 11.3 per cent fall tipped in a Reuters poll.

Shipments to China fell 16.3 per cent, while semiconductor exports sank just over 28 per cent.

South Korea, home to the world's top producers of memory chips and steel products, is bracing itself for possible disruptions in production if a weeks-old dispute with Japan worsens.

"The July data failed to provide any indication of improvement in exports for the short run as semiconductor sales and exports to China continue to suffer," said Mr Park Sang-hyun, an economist at Hi Investment & Securities.

"Tensions with Japan are another potential risk going forward," he added.

Imports last month fell 2.7 per cent over a year earlier, better than expectations for an 8.1 per cent drop. That brought the month's trade balance to a surplus of US$2.44 billion (S$3.36 billion).

South Korea, the world's sixth-largest exporter, is the first major industrial economy to release trade data each month, providing an early assessment on the health of global demand.

A survey of purchasing managers by IHS Markit yesterday pointed to further weakness ahead. New export orders for South Korean goods shrank the most in about six years, while business confidence crumbled, prompting factories to shed staff and cut prices of their goods to boost sales.

Early last month, Japan tightened restrictions on exports to South Korea of key materials used to make memory chips and display panels. Economists say the tech export curbs could shave 0.4 percentage point off South Korea's gross domestic product this year.

Tokyo is now moving to remove South Korea from its list of favoured trading partners, possibly as early as today.

South Korea's exporters have already been struggling with weakening global demand and supply chain disruptions caused by the year-long US-China trade war, which have hurt sales and caused a slump in the prices of their goods.

The world's two largest chipmakers, Samsung Electronics and SK Hynix, have in recent weeks reported plunging profits.

Semiconductors make up about a fifth of the country's total exports. Excluding them, last month's exports were down by a smaller 6.6 per cent from a year earlier.

As exports plunged, South Korea's economic growth cooled to 1.9 per cent in the first half of this year from a year earlier, the slowest pace since the 2008-2009 global financial crisis.


A version of this article appeared in the print edition of The Straits Times on August 02, 2019, with the headline 'S. Korea exports slump for 8th month'. Subscribe