January shipments tumble most since 2009 crisis
By Choi Kyong-ae
Korea's exports marked the worst slump last month in six-and-a-half years due to slowing growth in China and sluggish demand from global markets, the Ministry of Trade, Industry and Energy said Monday.
Exports in January plunged 18.5 percent year-on-year to $36.7 billion, the 13th-straight month of declines and the biggest drop since August 2009 when shipments tumbled 20.9 percent from a year earlier, the ministry said in a statement.
"January exports were affected by temporary factors such as fewer working days and a decrease in ship exports in addition to China's slowdown and falling prices for major export products amid low oil prices," the statement said.
For the whole of 2015, exports in Korea, the world's seventh-largest exporter, fell 8 percent year-on-year to $526.9 billion. Imports fell 17 percent to $436.5 billion during the same period. In January alone, imports plunged 20 percent to $31.4 billion from a year earlier, according to ministry data.
The outlook for this year has become grimmer, hit by weakening demand from China and other major trading partners, officials and analyst said.
As there are few signs of recovery in global demand this year, the government plans to seek a paradigm shift to boost slackening exports in the coming years.
"The government plans to explore markets such as Iran, Cuba, Malaysia, Cambodia and Thailand, while reducing its heavy reliance on exports to China and emerging markets in the long term," a ministry official said.
Sweeping economic and financial sanctions long imposed on Iran as punishment for its nuclear weapons ambitions were lifted last month by the international community. The opening of Cuba's economy is widely seen as offering business opportunities to multinational exporters.
Analysts raised the chances of the Bank of Korea's cutting its key rate to support the economy following the Bank of Japan's surprise monetary easing last week.
Eugene Investment & Securities economist Lee Sang-jae said, "weak overseas demand is not controllable and it takes time for companies to improve the competitiveness of their products. Further monetary easing seems to be needed to lower the value of the Korean won to help exporters."
Without monetary easing exports are expected to fall further this year, he said.
"Based on our 2.5 percent GDP growth forecast for 2016, we maintain our call that the BOK will cut policy rates by 25 basis points to 1.25 percent in June (from the current 1.5 percent)," Nomura Securities senior economist Kwon Young-sun said.
Faced with external risks such as the slowdown in China, foreign-exchange volatility and low oil prices, economists say Seoul badly needs to diversify its export markets, while strengthening promotions to sell core export items such as semiconductors, handsets and vehicles.
They also said the government needs to offer tax benefits to companies if they spend more on research and development to stay ahead of their rapidly-emerging rivals in China.
Finance Minister Yoo Il-ho said the government will take steps to prevent the falling exports from further weakening the economic growth.
"The government is considering front-loading some of its planned fiscal spending for this year to stimulate the economy (hit by China's slowdown and slackening exports) and other supportive measures,"Yoo told reporters.
The size of the earlier-than-planned fiscal spending will be at least 125 trillion won in the first quarter ending March 31, Yoo said, adding the government plans to announce economic stimulus packages, Wednesday.
Meanwhile, Korea posted a $105.9 billion current account surplus in 2015, up 26 percent from $84.4 billion a year earlier. But the surplus was largely due to steeper declines in imports rather than exports in the "recession-type" surplus which continued for a 46th straight month.
By Choi Kyong-ae
 |
Exports in January plunged 18.5 percent year-on-year to $36.7 billion, the 13th-straight month of declines and the biggest drop since August 2009 when shipments tumbled 20.9 percent from a year earlier, the ministry said in a statement.
"January exports were affected by temporary factors such as fewer working days and a decrease in ship exports in addition to China's slowdown and falling prices for major export products amid low oil prices," the statement said.
For the whole of 2015, exports in Korea, the world's seventh-largest exporter, fell 8 percent year-on-year to $526.9 billion. Imports fell 17 percent to $436.5 billion during the same period. In January alone, imports plunged 20 percent to $31.4 billion from a year earlier, according to ministry data.
The outlook for this year has become grimmer, hit by weakening demand from China and other major trading partners, officials and analyst said.
As there are few signs of recovery in global demand this year, the government plans to seek a paradigm shift to boost slackening exports in the coming years.
"The government plans to explore markets such as Iran, Cuba, Malaysia, Cambodia and Thailand, while reducing its heavy reliance on exports to China and emerging markets in the long term," a ministry official said.
Sweeping economic and financial sanctions long imposed on Iran as punishment for its nuclear weapons ambitions were lifted last month by the international community. The opening of Cuba's economy is widely seen as offering business opportunities to multinational exporters.
Analysts raised the chances of the Bank of Korea's cutting its key rate to support the economy following the Bank of Japan's surprise monetary easing last week.
Eugene Investment & Securities economist Lee Sang-jae said, "weak overseas demand is not controllable and it takes time for companies to improve the competitiveness of their products. Further monetary easing seems to be needed to lower the value of the Korean won to help exporters."
Without monetary easing exports are expected to fall further this year, he said.
"Based on our 2.5 percent GDP growth forecast for 2016, we maintain our call that the BOK will cut policy rates by 25 basis points to 1.25 percent in June (from the current 1.5 percent)," Nomura Securities senior economist Kwon Young-sun said.
Faced with external risks such as the slowdown in China, foreign-exchange volatility and low oil prices, economists say Seoul badly needs to diversify its export markets, while strengthening promotions to sell core export items such as semiconductors, handsets and vehicles.
They also said the government needs to offer tax benefits to companies if they spend more on research and development to stay ahead of their rapidly-emerging rivals in China.
Finance Minister Yoo Il-ho said the government will take steps to prevent the falling exports from further weakening the economic growth.
"The government is considering front-loading some of its planned fiscal spending for this year to stimulate the economy (hit by China's slowdown and slackening exports) and other supportive measures,"Yoo told reporters.
The size of the earlier-than-planned fiscal spending will be at least 125 trillion won in the first quarter ending March 31, Yoo said, adding the government plans to announce economic stimulus packages, Wednesday.
Meanwhile, Korea posted a $105.9 billion current account surplus in 2015, up 26 percent from $84.4 billion a year earlier. But the surplus was largely due to steeper declines in imports rather than exports in the "recession-type" surplus which continued for a 46th straight month.
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