SEOUL: South Korea’s exports shrank in February for the 14th consecutive month on soft global demand, adding to pressure on the central bank to ease policy to spur anemic growth.
The latest slump in South Korea’s shipments overseas reaffirms that there has been no quick recovery in sluggish global trade. South Korea is the first to release monthly trade data first in Asia, which makes it an early indicator of international trade for its major export items–including cars, ships, mobile phones, ships and refined oil–reaching nearly all major world markets including China, the U.S. and the EU
Exports dropped 12.2% from a year earlier to $36.42 billion in February, following a revised 18.8% fall in January, preliminary data released by the Ministry of Trade, Industries and Energy showed. The February reading–which fell at a slower pace than the previous month–compared with market expectations for a 14.9% drop.
“We expect exports to fall further in the coming months due to the higher volatility in global financial markets and emerging markets’ lower purchasing power,” said Hong Kong-based Nomura economist Kwon Young-sun. Nomura expects the Bank of Korea to cut its base rate by a quarter percentage point to 1.25% at its March 10 policy meeting, followed by another cut in October. The bank last cut the rate in June.
South Korea’s shipments overseas declined throughout last year. Sluggish global trade, lower oil prices and a slowdown in China–which takes in a quarter of Korea’s total exports–weighed on global demand for Korean goods. Korean exports to China declined 12.9% in February from a year earlier, following a 21.6% drop in January.
ING economist Tim Condon also warned about China’s slow industrial restructuring, which would expose Korean manufacturers to “cutthroat competition” in global trade. Chinese manufacturers have overflowed many global industries with cheaper goods. “We expect manufacturing to be a drag on Korea’s growth again in 2016,” Mr. Condon said.
Korean imports plunged 14.6% from a year earlier to $29.02 billion in February, following a revised 20.0% decline in January. The market had forecast a 15% drop in February. The trade surplus widened to $7.39 billion in February from the previous month’s revised $5.2 billion. The February reading beat the market projection for a $6.67 billion surplus. In 2015, South Korean exports contracted 8% from a year earlier–the sharpest decline in six years.
