South Korea, the fourth-largest economy in Asia, is expected to report a substantial increase in exports for the fourth consecutive month in January. The surge is primarily attributed to the strong performance of the semiconductor industry, with additional support from calendar effects.
According to a recent Reuters poll conducted from January 23rd to 29th, South Korea's exports are estimated to have grown by an impressive 17.8% compared to January last year. This growth rate surpasses December's gain of 5.0%, marking the most significant year-on-year increase since May 2022. The South Korean export sector, which began a slow recovery in October 2023 following a year-long downturn, appears to be regaining its momentum.
South Korea holds a unique position as the first major economy to release its monthly trade data, providing valuable insights into global demand. However, it's essential to note that data for January and February can be influenced by Lunar New Year holiday timing differences.
This year, the Lunar New Year holiday falls in February, while it occurred in January last year. This shift results in more working days and a favorable comparison base for January, contributing to the reported export growth.
Economist Chun Kyu-yeon from Hana Securities explains, "Korean exports are expected to remain in positive territory for the fourth straight month as semiconductor exports continue to be robust. Solid exports to the United States and improving shipments to China will likely lead the gradual recovery in exports."
Semiconductor exports, a key driver of South Korea's economy, saw an impressive 19.7% increase in the first 20 days of January, extending their growth streak for a third consecutive month. Exports to the United States increased by 3.6% during the same period, while exports to the European Union experienced a 9.4% decline. Shipments to China, after a challenging 19 months, rose slightly by 0.1%.
Despite the positive indicators, some challenges persist. Europe's weakening demand and supply chain disruptions in the Red Sea have impacted South Korea's port activities, particularly for non-tech exports that rely more heavily on sea transport.
Looking at imports, January is expected to see a year-on-year decline of 7.6%, which is a slower rate compared to December's 10.8% decrease and marks the smallest decline in ten months.
In terms of trade balance, the median forecast anticipates a surplus of $0.80 billion in January. While this would maintain a positive trade balance for an eighth consecutive month, it is notably smaller than December's surplus of $4.46 billion, the largest in three years.