Political chaos threatens growth of Korea's key export sectors

Containers for export are stacked at a port in the nation's southern port city of Busan, Nov. 29. Yonhap

The nation’s escalating political instability is likely to pose a significant challenge to boosting exports even into early 2025. The ongoing leadership vacuum, caused by President Yoon Suk Yeol's failed martial law order, is expected to hinder the diplomatic and business exchanges crucial for Korea's trade-dependent economy.

Korea's trade reliance exceeds 70 percent, the second-highest level in the world, making exports a crucial economic barometer for the nation's GDP growth.

However, exports here are at risk of losing growth momentum in December and into the next year due to the power vacuum caused by the recent martial law fiasco.

According to data from the Ministry of Trade, Industry and Energy, Korea's exports totaled $12.5 billion (17.84 trillion won) in November, marking a slight 1.4 percent increase compared to a year earlier.

However, the figure was driven mostly by semiconductor exports, with other key manufacturing sectors suffering double-digit declines in their exports during the same period.

Automobiles account for the second-largest export sector after chips, but auto exports fell by 13.6 percent last month due to the aftermath of sequential strikes by major carmakers such as Hyundai Motor and Kia.

The figure for secondary batteries was hit hardest, registering a fall of 26.3 percent during the same period.

Experts have warned that Korea faces a greater risk when it comes to export momentum over the next few months until the current political uncertainty is resolved.

“The key lies in how fast the country will be able to stabilize the current political risk here,” said Kim Dae-jong, a professor of business administration at Sejong University.

For now, Korea's top priority is to resolve the political crisis, as the economy can only gain sustainable growth momentum once government-level exchanges with other countries are activated, given the nation's heavy reliance on trade and exports, Kim added.

“The abrupt declaration of martial law will negatively affect the sovereign credit rating, which will bring sequential shocks to exports and every corner of the economy here from a short-term viewpoint,” he said.

Officials from the nation’s export-reliant manufacturing sector concurred on the pessimistic outlook regarding the nation’s export prospects.

“Workers from the nation’s umbrella union have threatened to hold an all-out walkout in protest of the Yoon administration, which will never do any good in boosting exports,” an official from a major conglomerate here said.

For instance, unionized members from Hyundai Motor and Kia have threatened to launch a strike due to the current political crisis. The Hyundai Motor union, the largest of its kind, has a membership of 44,000.

“The move, in itself, will worsen the nation’s export growth at a crucial time when the economy is faced with growing uncertainties amid the upcoming era of U.S. President-elect Donald Trump,” the official said.

In response, major business lobbies have urged members from major business circles to refrain from engaging in such strikes.

“A series of large-scale walkouts will aggravate people’s livelihoods, so every member of society should join hands to tackle the state's confusion and crisis,” an official from the Korea Enterprises Federation said.