South Korea feels crunch

– The coronavirus crisis in April sent South Korean exports plunging at their sharpest pace since the global financial crisis, signalling a bleak outlook for international trade as the pandemic paralyses the world economy and shatters demand.

Exports dived 24.3% yearon-year in April, trade ministry data showed yesterday, the worst contraction since May 2009 but slightly slower than a 25.4% fall tipped in a Reuters survey. It slid 0.7% in the previous month.

The average exports per working day, excluding the calendar effect, however, tumbled 17.4%, far worse than a 6.9% fall seen in March.

South Korea, Asia’s fourth-largest economy, is considered a bellwether for world trade and is the first among major exporting economies to release data on shipments.

The grim numbers underline the sweeping impact of the pandemic and points to a rough period for international trade as factories struggle amid collapsing global demand. On Thursday, factory surveys for China, the world’s biggest exporter, showed plummeting export orders.

“May will be extremely difficult for South Korea’s exports. We could potentially see the dip in shipments bottoming out in May should the US and Europe begin to normalise their economies,” said Park Sang-hyun, chief economist at Hi Investment & Securities.

“I cautiously expect exports to fall at a slower rate from June, especially on more stimulus from China and as oil prices recover, which should help boost Korea’s petrochemical products.”

A breakdown of the trade data showed overseas sales of the country’s top income earner, semiconductors, tumble 14.9%, while those of oil products, car components and wireless devices plummeted 56.8%, 49.6% and 33.4% respectively.

By destination, shipments to the biggest trading partner, China, fell 17.9%, while those to the US and the European Union also slumped 13.5% and 12.8% each.

Imports dropped 15.9% in April, reversing a 0.3% gain in the previous month and pushing the trade balance into a $0.95 billion (R17.9 billion) deficit, its first trade gap since January 2012.

Months of pandemic lockdowns across the US and Europe brought factories to a halt, causing unprecedented disruptions for many Korean businesses, including the nation’s global-trotting tech titans.

Samsung Electronics joined other tech giants such as SK Hynix in declining to provide annual forecasts, but said it expected profit to decline in the second quarter due to slumping sales of smartphones and TVs.

South Korea has pledged stimulus totalling about 240 trillion won (R3.7 trillion) to tackle the economic slowdown, while markets are betting the Bank of Korea could ease again in coming months. – Reuters