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South Korean Exports Stall as Virus Hits Global Demand

South Korean Exports Stall as Virus Hits Global Demand

(Bloomberg) --

South Korea’s exports fell slightly after a brief recovery as the coronavirus pandemic hit supply chains and suppressed global demand.

Overseas shipments declined 0.2% in March from a year earlier, the trade ministry said Wednesday. Economists had forecast a 1.6% gain. Exports to China fell 5.8%, while overall semiconductor shipments slid 2.7%.

South Korean Exports Stall as Virus Hits Global Demand

The actual picture was worse than the headline numbers suggest because the month had more working days than a year earlier, with average daily shipments falling 6.4%. That drop underscores weakness in overseas demand as the pandemic raises the prospect of a global recession and triggers lockdowns in major trade partners. The ministry said the impact from the virus had yet to really show up in last month’s data, but April could be worse.

Key Insights

  • The March trade figures darken the outlook for South Korea’s export-dependent economy. S&P Global Ratings last week forecast a 0.4% contraction for this year.
  • South Korea is the world’s biggest exporter of memory chips, so its shipments are a barometer of global tech demand. While most analysts see the pandemic hurting businesses across all sectors, some remain cautiously optimistic that demand for tech gadgets could get a boost from people shut-in or working from home.
  • South Korea’s data partly supported that view, with the trade ministry saying shipments of tech product increased due to more online shopping, distance learning and work-from home-related demand.
  • Semiconductor sales “put up a good defense,” Finance Minister Hong Nam-ki said Wednesday. He said more working days also helped the country dodge a “rapid export shock” for now.
  • South Korea’s government announced 100 trillion won ($82 billion) in aid to shore up businesses and financial sectors on top of an 11.7 trillion won extra budget approved by parliament. The Bank of Korea has also pledged “unlimited liquidity” for three months in what amounts to quantitative easing.
  • “Frankly it’s going to be difficult for at least the first half,” said Kim Keon-woo, an analyst at the Korea International Trade Association. “Even though the outbreak has calmed down in China, the country’s production and consumption haven’t fully recovered, and global demand will eventually impact its production.”

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  • Overall imports declined 0.3% from a year earlier, leaving a surplus of $5 billion.
  • The 5.8% decline in exports to China was driven by less demand for South Korean petrochemical and petroleum products, displays and steel. The ministry said shipments to China are showing recovery as the outbreak there slows.
  • Exports to the U.S. and the euro area rose 17% and 10%, respectively.
  • Automobile shipments increased 3%, while exports of phones and other wireless communication devices rose 13%.
  • Shipments of oil products fell 5.9% and display sales decreased 13%.

©2020 Bloomberg L.P.