South Korea’s latest trade data indicates a continued rise in exports, signaling a positive outlook for economic growth this year. According to the customs office, the value of shipments, adjusted for working-day differences, increased by 17.7% in the first 20 days of May compared to the same period last year. Unadjusted exports saw a modest rise of 1.5%, while imports fell by 9.8%, resulting in a trade deficit of $304 million.
The country’s economy expanded by 1.3% in the first quarter, driven primarily by a strong export performance, exceeding the expected 0.6% growth. This robust performance may prompt the Bank of Korea (BOK) to revise its annual economic growth forecast upwards from the current 2.1% during its upcoming board meeting.
Semiconductor shipments have been a significant contributor to this growth, jumping 45.5% in the first 20 days of May, fueled by demand from smartphone manufacturers, data-center operators, and AI developers. However, the auto sector saw a decline of 4.2%, and wireless communications devices exports dropped by 9%.
The United States continues to lead in demand for South Korean products, with exports to the US rising by 6.3%, while shipments to China grew by 1.3%. Conversely, exports to the European Union fell by 11.8%.
Citi Research anticipates the trade surplus to expand to $4.3 billion for May, up from $1.5 billion in April, highlighting strong export momentum. Meanwhile, Goldman Sachs notes a slight decrease in seasonally adjusted export gains from the previous month.
Despite these positive trends, risks remain. Credit issues persist as developers grapple with pandemic-era debts, and China’s recovery from its spending slump remains slow. Additionally, the won’s depreciation has posed challenges for import-dependent industries, increasing costs for energy and raw materials.
Lim Dong-min, an independent economist, noted the dual impact of the exchange rate. While it boosts exporters' earnings in local currency terms, it also increases the burden for firms reliant on foreign debt, adding to overall uncertainties.
South Korean firms play a crucial role in global supply chains, particularly in semiconductors, automobiles, and batteries. As the country navigates these economic dynamics, maintaining export momentum will be key to sustaining growth.
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