SEOUL- South Korean exports plunged 19.5 percent over the first 20 days of October from a year earlier, pressured by weak sales to China and frail global demand for semiconductors, dealing a fresh blow to a tottering economy.
Economists said that Monday’s figures, which were worse than an 11.7 percent drop in exports for the whole of September, underlined the tough road ahead for manufacturers with the chips sector holding the key for the industry’s outlook.
“You have to look at the semiconductor industry to talk about a rebound in exports because chips account for the largest share of South Korea’s exports,” said Oh Suk-tae, economist at Societe Generale in Seoul.
“It appears the semiconductor industry’s cycle has reached its trough, but it’s uncertain when the big turnaround will happen, as well as how fast the recovery will be.”
The customs agency of South Korea, one of the world’s top 10 exporters, releases 20-day foreign trade figures every month and the data is watched closely by economists to take the pulse of the global economy.
Semiconductor exports, which account for around one-fifth of South Korea’s total overseas shipments, dived 28.8 percent in value for the Oct. 1-20 period on-year as prices around the world pulled back sharply since late last year after strong rally.
Markets showed a muted reaction as investors have factored in the bad numbers. The won was up about half a percent against the dollar and the stock market’s KOSPI edged up 0.1 percent.
Economists said prospects for global trade were clouded given skepticism over whether the United States and China could reach a durable deal to end a 15-month long tariff dispute that has upended global supply chains and slowed world growth.
The poor export figures came less than a week after the country’s central bank slashed the policy interest rate to a joint record-low on Wednesday last week, a second cut in three months, to support the faltering economy.
Over the weekend, Finance Minister Hong Nam-ki told reporters while visiting Washington he was now expecting this year’s economic growth to be around 2.0-2.1 percent, abandoning the government’s target of 2.4-2.5 percent.
Even if the semiconductor industry turns around, the slowing Chinese economy means any rebound in South Korean exports could be far from certain as the giant neighbor takes in about a quarter of Seoul’s total shipments abroad.
Monday’s customs agency data showed exports to China dropped 20.0 percent for the Oct. 1-20 period from a year earlier, while sales to the United States fell 17.4 percent.
Shipments to the European Union tumbled 36.6 percent over the period. – Reuters