South Korea is expected to record a commodity export growth of 3.7% this year, according to the Bank of Korea BOK). Earlier, the International Monetary Fund (IMF) estimated this year’s global trade growth at 4.2%.
This is likely to repeat itself next year. According to the central bank of South Korea and the IMF, South Korea’s export growth for next year is estimated at 3.5% and the global trade growth for next year is estimated at 4.0%. Then, the former will be lower than the latter for the fifth consecutive year.
The former used to reach 300% and 200% of the latter on annual average in the 1980s and the 2000s, respectively. However, South Korea’s export growth has declined a lot since the global financial crisis of 2008. The figures were 1.1% vs. 3.3% in 2014 and the same trend has continued since that year.
Economists attribute this to a decline in the competitiveness of South Korean exporters. “Although South Korea’s monthly exports hit a new high this year thanks to a boom in the semiconductor industry and a recovery of the global economy, the South Korean economy’s structural problems deepened at the same time in the form of a delay in the refinement of export items and a higher level of concentration on a small number of export items,” one of them commented. At present, semiconductors and ships are the only two out of the 10 major export items of South Korea that are showing a consistent growth in exports. Semiconductors accounted for 11% to 13% of South Korea’s total exports last year but the ratio rose to 21.1% in October this year to exceed 20% for the first time ever.
“Concerns are rising over the competitiveness of South Korean exporters with their non-price competitiveness and added value indices on the decline,” the Hyundai Research Institute mentioned, adding, “Although it is also true that their slower export growth is partly because of an increase in trade volume itself, which is estimated to reach US$1 trillion this year, South Korea’s export growth rate is likely to keep falling unless the exporters strengthen themselves.”