SEOUL (BLOOMBERG) - South Korea’s early trade data indicate exports are set to post strong gains this month as powerful US demand shores up global commerce in the face of a Covid-19-induced slowdown in China.
Exports advanced 16.9 per cent in the first 20 days of the month from a year earlier, led by semiconductors, the customs office reported on Thursday (April 21).
Exports to China, the biggest buyer of South Korean goods, rose just 1.8 per cent while shipments to the United States surged 29.1 per cent.
South Korea releases trade data earlier than most countries and its 20-day performance is closely watched as an indicator of global demand due to South Korean companies’ deep integration into the world’s supply chains. That was reflected in the diverging results for the world’s two largest economies that are also South Korea’s top two overseas markets.
Dr Anne-Marie Gulde, Asia and Pacific deputy director at the International Monetary Fund, highlighted this in an interview with Bloomberg Television just prior to the release of the data, noting that a forecast downgrade for China’s growth will impact surrounding economies.
“The most important channel is the trade channel,” said Dr Gulde. “Half of growth in Asia is now within Asia. So to the extent that demand for imports in China goes down, that definitely has a negative effect on all of those countries that export to China.”
Overseas shipments are a major component of South Korea’s economy, which is expected to miss growth estimates this year as inflationary pressures overshadow consumption worldwide. Russia’s war on Ukraine is compounding difficulties by driving up commodity prices.
Thursday’s data indicate overall exports remain robust, as the Bank of Korea had predicted earlier in the year.
Economists say the central bank is likely to stick to a path of policy normalisation, with new governor Rhee Chang-yong seeking to lift the benchmark rate further unless he sees risks to the economy.
Thursday’s report showed the trade deficit from April 1 to 20 swelled to US$5.2 billion (S$7.1 billion) as imports surged 25.5 per cent.
Semiconductor shipments increased 22.9 per cent, according to the data. Exports of cars edged down 1 per cent, while oil products jumped 82 per cent. Sales of wireless communication devices fell 10.7 per cent.
Exports to the European Union climbed 12.3 per cent and those to Japan increased 9.6 per cent.
