SEOUL- South Korea’s exports grew at their slowest pace in 14 months in April, with the trade deficit widening as China-bound shipments shrank and rising energy and raw materials prices pushed up the country’s imports.
Exports grew 12.6 percent from a year earlier to $57.69 billion, trade ministry data showed on Sunday, the slowest since February 2021. It was below the forecast for 14.5 percent growth in a Reuters poll and slower than the 18.2 percent rise in March.
South Korea’s monthly trade data, the first to be released among major exporting economies, is considered a bellwether for global trade.
Exports to China, South Korea’s biggest trading partner, were hurt by Beijing’s zero-coronavirus policies, with lockdowns hitting industrial production and disrupting supply chains.
Shipments to China fell 3.4 percent, while those to the United States rose 26.4 percent and to the European Union increased 7.4 percent.
Exports of semiconductors, the country’s top foreign exchange earner, climbed 15.8 percent, while petrochemical products rose 6.8 percent. Outbound shipments of oil jumped 68.8 percent and steel products rose 21.1 percent. Imports increased 18.6 percent to $60.35 billion, led by a combined $14.81 billion worth of imports of crude oil, gas and coal.
That gave South Korea a trade deficit of $2.66 billion, wider than the March deficit of $115 million.
The export slowdown comes as the country battles red-hot inflation. The Bank of Korea last month raised its benchmark rate to the highest since August 2019 in a surprise move, expressing concerns that the economy is expected to miss the bank’s February growth forecast of 3 percent for this year.
South Korea’s central bank raised its benchmark rate to the highest since August 2019 last month in a surprise move as it ramped up the fight against rampant inflation, which threatens its economic recovery.
In its first ever rate review held without a governor, the bank’s monetary policy board voted to raise interest rates
Most analysts had expected the Bank of Korea to keep rates unchanged until its new governor assumes office, after Lee Ju-yeol’s term as chief ended last month.
Joo Sang-yong, acting chairman of the six-member policy board, said the bank could not to wait for the formal appointment of a new governor to continue efforts to slow inflation and warned price growth was likely to top 4 percent for a while, up from its February forecast of 3.1 percent.
“A back-to-back rate hike in May is also likely,” said Paik Yoon-min, an analyst at Kyobo Securities, who sees the policy rate at 2.00 percent by the end of this year.
“If the Fed starts making big step hikes from May, it will soon catch up on South Korea’s base rate and weaken the effectiveness of pre-emptive moves by the BOK.”
While the hike went against most economists’ official forecasts, an April tightening was seen as a live prospect by many investors and the Korean won and bond yields were little swayed following the move. — Reuters
