SEOUL- South Korea’s finance minister said the country’s exports and investment would be weak at least through the first half of the year and that the government would provide maximum support to ease the situation.
“The government will provide maximum support to boost exports and investment by companies so that the timing of an economic rebound can be advanced,” Minister Choo Kyung-ho said at a meeting of trade-related officials.
He also said inflation would hover around 5 percent in annual terms during the first quarter before easing throughout the rest of the year. The central bank has said inflation would ease towards 3 percent later in the year.
South Korea’s economy inched toward its first recession in three years as data last week showed its January trade deficit soared to a record thanks to a plunge in exports caused by a combination of long holidays and cooling global demand.
Asia’s fourth-largest economy, which relies heavily on trade for growth, shrank by 0.4 percent in the October-December quarter and is now on the brink of falling into what would be its first recession since the middle of 2020 during the height of the COVID-19 pandemic.
Exports fell 16.6 percent in January from a year earlier, trade ministry data showed, worse than an 11.3 percent decline predicted in a Reuters survey and the fastest drop in exports since May 2020.
Imports fell 2.6 percent compared with a year earlier, less than a 3.6 percent drop predicted in the survey. As a result, the country posted a monthly trade deficit of $12.69 billion, setting a record amount for any month.
The increasing chances of recession – two consecutive quarters of decline in gross domestic product – also underscore growing bets in markets that the central bank’s campaign of raising interest rates since late 2021 has run its course.
Leading the sluggish trade performance in January were a 44.5 percent dive in semiconductor exports and a whopping 31.4 percent plunge in sales to China, the trade ministry data showed.
Both were the worst rates of decline since the 2008/2009 global financial crisis. — Reuters
