S. Korea's Exports Down Again in April

Facts

• South Korea's trade ministry on Monday released preliminary data showing that the country's exports fell 14.2% from a year earlier in April, marking the seventh straight month of decline and its longest losing streak in more than three years.¹
• The worse-than-expected downturn — which was the biggest drop in three months — came as sales to China tumbled despite Beijing having reopened its economy months ago. The development reinforced suspicions that the South Korean economy is struggling to perform amid weak global demand.²
• Exports to China, Seoul's main trade partner, dropped 26.5% last month — extending the losing streak into its eleventh month — while shipments to Southeast Asia plunged 26.3% and those to the US declined 4.4%. Exports to the EU and the Middle East, however, rose by 9.9% and 30.7%, respectively.³
• By product, the annual fall was primarily driven by the 41% reduction in semiconductor exports, with petroleum product exports dropping 27.3%, and those of petrochemicals and steel falling 23.8% and 10.7%, respectively. Car and vessel exports, on the contrary, soared 40.3% and 59.2%, respectively.⁴
• The ministry stated that the decline was mainly due to a delay in global economic recovery and weakness in the semiconductor industry. In similar news, South Korea's imports also fell 13.3% year-on-year in April, the biggest drop since August 2020.⁵
• Trade is a key component of South Korea's economy, which grew a marginal 0.3% in 2023 Q1 from the prior quarter, as the country relies heavily on global commerce to generate growth.⁶

Sources: ¹Wall Street Journal, ²Reuters, ³Yonhap News Agency, ⁴Business Insider, ⁵Al Jazeera, and ⁶Bloomberg.

Narratives

• Narrative A, as provided by KED Global. The economic fundamentals relied on by South Korea have deteriorated, mainly due to falling exports as semiconductor prices have lost ground upon weakened demand, prompting the country's currency to depreciate even against a softer dollar. Given that China's economic recovery is weaker than expected, and that geopolitical tensions have been simmering, South Korea's economy is headed towards an uncertain future.
• Narrative B, as provided by Reuters. It's true that South Korea's trade-reliant economy is feeling the hurt as exports are weakening amid a cooling global economy, with the demand for semiconductor chips, particularly from China, yet to recover to pre-pandemic levels. However, though the outlook remains cloudy due to weak global demand, a predicted recovery in the IT sector and the Chinese economy is likely to prompt a rebound in the second half of the year

Predictions