SEOUL: South Korea’s exports declined in January to start the year on a weak note, adding pressure on the central bank to ease policy further to spur growth.
Exports fell 0.4% from a year earlier to $45.37 billion, following a revised 3.6% gain in December, according to provisional data at the trade ministry Sunday. The January reading compares with the median 3.0% drop forecast in a Wall Street Journal survey of economists.
The ministry attributed the January drop in exports to lower crude prices that cut into the value of the South Korean shipments of oil-refinery and petrochemical goods. South Korean exports to Russia and Middle East countries, hit by weaker oil prices, as well as the European Union, suffered a setback, it said.
Imports plunged 11.0% from a year earlier to $39.84 billion in January, following a 0.9% decrease in December. The survey had forecast a 3.7% drop in January. The steep fall in imports came largely from lower global oil prices, the ministry said. South Korea is a big energy importer.
The trade surplus–in the black since February 2012–narrowed to $5.53 billion in January from the previous month’s revised $5.75 billion. The January reading beat the poll’s projection of $2.16 billion in surplus.
The decline in January exports, though at a slower-than-expected rate, is likely to pressure the Bank of Korea to consider more rate cuts this year.
South Korea’s gross domestic product growth slowed to its weakest pace in more than two years in the final quarter of 2014. Despite two policy rate cuts and a nearly $40 billion stimulus package last year, high household debt levels continued to suppress local demand. A slowdown in China, which takes in a quarter of South Korean exports, also weighed on the economy. For 2014, South Korea’s economy expanded 3.3% compared with 3% growth in the prior year.
In January, the central bank cut its 2015 growth forecast to 3.4% from 3.9%. The bank kept its policy rate unchanged at 2% for a third straight month in January, saying it was still measuring the impact of rate cuts in August and October last year.
