South Korea, a significant barometer of global trade, is expected to break a year-long trend of declining exports and report growth in October, driven by strong demand from the United States and increased chip shipments. However, softer exports to China have been a drag on this recovery, according to a Reuters survey.
Export figures from South Korea, Asia's fourth-largest economy, are closely watched as they provide valuable insights into the state of global demand. The survey of 12 economists suggests that South Korea's outbound shipments in October are likely to have grown by 5.5% compared to the same month last year, a significant turnaround from the 4.4% loss reported in September. This would mark the end of a 12-month streak of declining exports that persisted until September.
The expected growth in October can be attributed to robust exports to the United States, particularly in the semiconductor sector. Additionally, base effects have provided some support after a year of economic downturn. However, the survey notes that weak demand in China remains a challenge for South Korea's exports.
Economist Chun Kyu-yeon of Hana Securities expressed optimism, stating that South Korea's export recovery is likely to extend into the next year. He highlighted strong trends in shipments to the United States and the European Union, although exports to China are still sluggish.
In the first 20 days of October, South Korea's exports increased by 4.6% compared to the previous year. Exports to the United States saw a significant jump of 12.7%, while those to China experienced a 6.1% decline.
Park Sang-hyun, an economist at HI Investment Securities, cautioned that while the trend of export growth may continue due to base effects, the extent of the recovery is expected to be modest.
Conversely, imports are likely to have decreased by 4.3% in October compared to the previous year, a milder decline compared to the 16.5% slump recorded in September. This is attributed, in part, to higher oil prices. As a result, South Korea's trade balance is expected to shift to a deficit in October, following four consecutive months of surplus. The survey's median forecast predicts a deficit of $2 billion, a significant shift from the $3.7 billion surplus reported in September.
