SEOUL – South Korea’s early trade data shows that exports are continuing to grow at a double-digit clip, boosting the prospects for an acceleration in economic growth in 2024.

The value of shipments adjusted for working-day differences increased 17.7 per cent from a year earlier in the first 20 days of May, according to data released on May 21 by the Customs office.

Unadjusted exports rose 1.5 per cent, while overall imports decreased by 9.8 per cent.

South Korea posted a 1.3 per cent economic expansion in the first quarter from the previous three-month period, with a robust recovery in exports among factors leading the way.

This performance, which soundly exceeded the 0.6 per cent forecast, will likely prompt the Bank of Korea (BOK) to raise its economic growth forecast for 2024 from 2.1 per cent when the board convenes later this week.

Strong exports can add to the rationale for the central bank to hold its policy rate elevated for longer. The BOK is widely expected to keep its benchmark rate steady at 3.5 per cent, a level it has described as restrictive, when officials set policy on May 23.

Semiconductors from South Korea and other Asian economies have especially been in demand as prices pick up on orders from smartphone makers, data centre operators and artificial intelligence developers.

For the first 20 days of May, semiconductor shipments jumped 45.5 per cent from a year earlier, the Customs data showed. Meanwhile, car sales declined 4.2 per cent and the exports of wireless communications devices dropped 9 per cent.

“Strong semiconductor demand should further lead to outperformance of the manufacturing sector and a gradual recovery of facilities investment in the rest of this year,” Citi Research said in a May 14 note.

A strong US economy has also helped offset a slump in demand from China. Exports to the United States increased 6.3 per cent and those to China rose 1.3 per cent in the first 20 days of the month, the Customs office said. Shipments to the European Union slumped 11.8 per cent.

There are still downside risks for South Korea’s growth. Credit concerns persist as developers struggle with debt that piled up during a pandemic-era construction boom. Meanwhile, China, South Korea’s biggest trading partner, has yet to rebound fully from a spending slump as its housing crisis continues to weigh on activity.

The exchange rate remains a source of concern as South Korea relies heavily on imports of energy and raw materials to assemble products for export. The won has been one of Asia’s worst-performing currencies in 2024, along with Japan’s yen and Thailand’s baht.

While the elevated US dollar-won rate helps swell exporters’ earnings in local currency terms, it is also increasingly becoming a burden for those that rely on overseas manufacturing demand because a large portion of their debt is in foreign currencies, according to Mr Lim Dong-min, an independent economist and columnist.

“It’s both good and bad for exporters, but overall, it adds to uncertainties,” Mr Lim said.

South Korean firms are part of a wide range of global supply chains, especially in industries such as semiconductors, automobiles and batteries. BLOOMBERG