Outlook for exports turning positive
Semiconductors lead upturn in overseas shipments
By Yoon Ja-young
The country’s exports jumped 11.2 percent in January — the first double-digit growth in four years — boosted by the booming semiconductor industry.
Analysts cautiously expect the recovery to continue on rising product prices and a rebound in the global economy. But they said growing global protectionism may keep exports from extending the strong growth.
“The rebound in global oil prices is leading to rises in product prices,” Kim Doo-un, an economist at Hana Financial Investment, said. “The outlook for exports is positive on improving emerging economies and enhancing expectations on global inflation.”
According to the Ministry of Trade, Industry and Energy, exports totaled $40.3 billion last month, up 11.2 percent from a year ago. Exports marked growth for three consecutive months.
Record semiconductor exports and the rising price of petrochemical products led the increase. The country’s chip exports stood at a record $6.4 billion because of rising memory chip prices.
Exports of petrochemical products totaled $3.5 billion, the highest since December 2014, on rising export prices and increasing production.
Flat-panel display exports rose 20.8 percent, the highest in four years, following bullish demand for organic light emitting diode (OLED) panels and the rising price of LCD panels.
“The recovery in prices of major export items will continue for the time being,” said Park Sang-hyun, a chief economist at Hi Investment and Securities.
“The recovery of developed economies, as well as emerging economies, will have a positive impact on exports.” He attributed the recovery in the global investment cycle on the fourth industrial revolution and “Trumponomics,” as well as the won/dollar rate that hovers around 1,200 won, as other boosting factors for exports.
The government is also upbeat.
“Exports are leading the recovery in other sectors such as facility investment,” Strategy and Finance Minister Yoo Il-ho said at the economy-related minister meeting Wednesday. “The government will provide full support for businesses seeking opportunities in infrastructure markets overseas. There will be tailored support for promising export items, on top of seeking FTAs for markets with huge growth potential.”
Exports of ships, home electronics, mobile devices, automobiles and textiles, however, continued to decrease. Imports totaled $37.1 billion, up 18.6 percent from a year ago. The trade account had a $3.2 billion surplus, continuing a surplus for 60 consecutive months. The trade ministry estimates annual exports to mark a 2.9 percent increase this year.
However, there remain risks related to the country’s two major export markets, China and the United States.
Kim at Hana Financial Investment cited increasing U.S. protectionism as the main risk.
“The final target of U.S. protectionism is China,” he said. “Though Korea is structurally different from China in the United States’ import market, much of its exports go via China. There is a need to closely monitor how the United States takes protectionist measures.”
Trade minister Joo Hyung-hwan told reporters he is aware of the risks.
“There are positive factors in the global economy and trade, but there also remain negative factors such as increasing protectionism in trade,” he said. “We are continuing to monitor the situation.”
He said the government is preparing for all possibilities regarding the Korea-U.S. Free Trade Agreement (FTA), including renegotiation. There has been concern that the new Donald Trump administration may call for a renegotiation.
“We should prepare for the worst while hoping for the best,” the minister said.
Park at Hi Investment and Securities also cited restrictions on Korean products by China as another potential risk for exports. Following Korea’s decision to deploy the U.S. THAAD missile defense system in response to North Korea’s nuclear threat, China has been restricting some of Korea’s exports, which is suspected as retaliation.