South Korea, one of the world’s largest exporters, has reported a slower decline in its exports for August, indicating a possible improvement in global trade amid the COVID-19 pandemic and other uncertainties. The country’s exports fell 8.4% from a year earlier, according to data released Friday by the trade ministry. This was the smallest drop since December and better than the 11.8% fall expected by economists. The country also logged a trade surplus of $870 million, the third consecutive month of positive balance.
Factors behind the export performance
The trade ministry attributed the better-than-expected export performance to several factors, including:
- The recovery of major trading partners such as the US and the EU from the pandemic-induced slowdown.
- The increase in global demand for automobiles, which boosted Korea’s exports of cars and car parts by 29%.
- The stabilization of China’s manufacturing sector, which helped Korea’s exports to its largest market decline by only 20%, compared to 24.4% in July.
- The rise in prices of some key export items such as petrochemicals and steel, which offset the volume decrease.
However, not all export sectors performed well in August. The country’s flagship industry, semiconductors, saw its exports plunge 21% due to weak demand and falling prices. This was the 11th straight month of decline for the chip sector, which accounts for about 20% of Korea’s total exports. Another major export item, petroleum products, also suffered a 35% drop due to low oil prices and reduced refining margins.
Challenges and prospects for Korea’s trade
Despite the signs of recovery in August, Korea’s trade faces many challenges and uncertainties ahead. Some of the main risks include:
- The spread of the new COVID-19 variant Omicron, which has raised fears of new lockdowns and travel restrictions around the world.
- The ongoing supply chain disruptions caused by port congestion, container shortages, and labor issues.
- The geopolitical tensions between China and the US, which could escalate into a trade war or affect Korea’s access to the Chinese market.
- The competition from China and other countries in high-tech sectors such as semiconductors and electric vehicles.
The trade ministry said it will closely monitor the global trade situation and support Korean exporters to overcome the difficulties. It also expressed optimism that Korea’s exports will improve in the coming months as global demand recovers and new products such as OLED TVs and hydrogen cars gain popularity.
