Evaporating confidence

Companies paint bleak outlook for 2nd-half exports

By Lee Hyo-sik

Exports have become Korea’s prime growth engine over the past few years, with prolonged sluggish domestic demand compounded by a corporate reluctance to invest.

But outbound shipments have begun losing steam in recent months on lackluster demand overseas for Korean-made products amid the worldwide economic downturn, casting a dark cloud on Asia’s fourth largest economy.

Particularly, local exporters are facing great difficulty in selling goods in Europe, which has been grappling with the sovereign debt crisis. Consumers across the continent have tightened their purse strings to cope with rising unemployment and other unfavorable economic conditions. Exports to Europe declined at a double-digit rate over the past year.

To make matters worse, the United States and China, two of Korea’s main export markets, are increasingly losing growth momentum, meaning the world’s No. 1 and No. 2 economies are demanding fewer made-in-Korea products.

Many exporters here paint an increasingly bleak outlook for the remainder of the year, saying outbound shipments will decline from the first half or remain unchanged.

According to the Ministry of Knowledge Economy, Sunday, exports rose only 0.7 percent to $275.3 billion in the first six months of this year from the same period 2011. Imports rose 2.5 percent to $264.6 billion, putting the country’s trade surplus at $10.7 billion.

``Due to slowing European and Chinese economies, outbound shipments of chemical and steel products continue to hit a snag in the first half. Global demand for other industrial goods produced here also declined,’’ a ministry official said.

Since the Korea-EU free trade agreement went into effect in July last year, outbound shipments to Europe have dropped 12.1 percent from a year earlier, reducing Korea’s trade surplus to merely $1.8 billion from the previous $14 billion.

Exports of ships, semiconductors and wireless communication devices plunged 47.3 percent, 44.7 percent and 40.7 percent, respectively.

In contrast, Korea imported 13.5 percent more from Europe. Imports of luxury bags, shoes and watches surged 35 percent, 31 percent and 51.1 percent, respectively.

``However, exports could pick up some steam toward the year’s end in line with the easing of the European debt crisis and stimulus measures introduced by the U.S. and China to spur growth. We will take all possible measures to help firms sell as many products as possible abroad,’’ the official said.

Bleak outlook for 2nd half

The majority of local exporters remain downbeat for the latter half of the year, saying the continued European fiscal crisis, surging raw material costs, and a slowdown in the U.S. and Chinese economies will negatively affect their efforts to sell goods overseas.

According to a survey of 500 export-oriented manufacturers conducted by the Korea Chamber of Commerce and Industry (KCCI), only 33 percent said business conditions will improve in the second half. But 21.8 percent projected exports will fall, with the remaining 45.2 percent putting their outbound shipments on par with those of the first half.

About 50.6 percent said they have been affected by the European debt crisis, citing a drop in export volumes to Europe and China, and a difficulty in foreign exchange management.

The survey also found that only 35 percent of exporters have a contingency plan to deal with the Europe problem. They have tried to diversify export markets, reduce operating costs, develop new technologies, boost overseas marketing and restructure the workforce.

Companies citied the continued global economic downturn as the greatest external risk, followed by slowing U.S. and Chinese economies. Exporters demanded the government make more efforts to stabilize prices of raw materials and foreign exchange rates, among others.

``With the never-ending European crisis and slowing developing economies, global trade environments will likely remain unfavorable for local exporters, if not deteriorate further,’’ a KCCI official said.

``The government should extend more financial and other support to small-and medium-sized firms. Companies themselves must make more efforts to establish a presence in emerging markets,’’ he said.