Korean exports continue to freefall

Merchandise exports decreased 14.3% year-on-year in November, marginally less than the 14.8% drop recorded in October, totaling $44.1 bln in November ($46.7 bln in October), FocusEconomics portal reports. Meanwhile, merchandise imports fell 13.0% in November, slightly better than October’s 14.6% fall, and totaling $40.7 bln (October: $41.4 bln).

The merchandise trade surplus narrowed to $3.4 bln in November from $4.7 bln in the same month a year prior (October 2019: $5.3 bln surplus). Meanwhile, the 12-month moving sum of the trade balance narrowed to a $41.5 bln surplus in November from the $42.8 bln surplus in October.

Another month, another scorching decline in Korean exports, as subdued prices for semiconductors and petrochemicals weighed heavily on trade in November. The Korea-Japan political rift is also aggravating matters as trade between the two economies has freefallen since July, when Japan introduced export limits on chemicals to Korea, which are instrumental to Korea’s tech sector.

Looking ahead, external headwinds such as trade protectionism and a moderate global growth outlook will continue to drag on the external sector. However, an expected bottoming out global demand for tech should provide some relief to the external sector next year. Moreover, solid demand from China and a possible Regional Comprehensive Economic Partnership deal should provide further support to trade.

FocusEconomics panelists expect merchandise exports and imports to both increase 1.3% in 2020, bringing the trade surplus to $70.9 bln. In 2021, exports are expected to increase 8.8% and imports to rise 3.1%, resulting in a trade surplus of $105.6 bln.

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