SEOUL: South Korean exports declined for a sixth straight month in June, keeping policymakers under pressure as they sought to inject billions of dollars of fresh stimulus into an economy reeling from a one-two punch of weak domestic and global demand. Exports fell 1.8 percent in June from a year earlier while imports tumbled 13.6 percent, the trade ministry data showed on Wednesday. As a result, the trade surplus nearly doubled to a record $10.2 billion from $5.4 billion a year before.
The export performance was in line with the market’s expectations and better than a 10.9 percent fall in May, but the value per working day was down a sharper 12.3 percent in June on-year. A survey by Markit Economics also showed on Wednesday new export orders that South Korean manufacturers received during June fell for a fourth consecutive month.
“We’ll keep seeing falls in exports throughout the third quarter which will be inevitable due to the debt crisis in Greece and sluggishness in China,” said Park Sang-hyun, chief economist at HI Investment & Securities. For the three months to June, exports fell 6.9 percent on-year – the worst decline since the third quarter of 2009. Adding to the gloomy external picture, the outbreak of the deadly Middle East Respirator Syndrome has dented domestic demand and put more strain on a shaky economy.
In response, the central bank cut interest rates to a record low in June and the government plans to move a stimulus budget bill worth around 15 trillion won ($13.41 billion) to parliament by July 6. Global investment banks such as ING and Nomura are sceptical these stimulus efforts will enable South Korea to achieve this year’s growth target, even as the government slashed the target to 3.1 percent last week from the previous 3.8 percent.
South Korea, home to global manufacturing titans such as smartphone maker Samsung Electronics and automaker Hyundai Motor, is the first major economy to release monthly trade figures. Hyundai Motor, the country’s largest automaker, said later on Wednesday its overseas sales fell 2.2 percent in volume terms in June from a year earlier despite more working days. The trade ministry said in a statement export conditions would improve in the second half, but the potential for the Greek crisis to disrupt Korea’s key euro zone market has raised further uncertainty. Markets are wagering on another rate cut in coming months, a view supported by well anchored inflation.
