Export-focused Economics
In August, exports outperformed expectations, surpassing seasonal factors such as summer vacations. The year-on-year decline in exports narrowed to single digits, and the decline in semiconductor exports to China also moderated compared to the previous month.
According to the Ministry of Trade, Industry, and Energy (MOTIE) and other relevant agencies on Sept. 1, exports for the last month were recorded at US$51.9 billion. This marks an 8.4 percent decrease compared to the same period last year. Exports have been on a declining trend for 11 consecutive months since October of last year at -5.8 percent.
A somewhat positive aspect is that the export decline in August significantly improved to single digits compared to the previous month at -16.4 percent. Although August is generally a period with the lowest export figures throughout the year, the daily average export value of US$2.16 billion last month slightly surpassed US$2.14 billion in July. Additionally, it is somewhat positive that semiconductor exports to China, which had been suppressing export recovery since last year, showed improvement.
In August, semiconductor exports reached US$8.56 billion. While this represents a 20.6 percent decrease compared to the previous year, it saw a 15 percent increase compared to the previous month. This indicates a trend of bottoming out and recovery. Semiconductor exports, which averaged US$6.9 billion per month in the first quarter and US$7.5 billion per month in the second quarter, recorded an average of US$8 billion per month in July and August.
Last month, the export decline rate to China was 20 percent, showing a slowdown compared to the previous month’s 25 percent. The export value to China also increased by US$600 million to US$10.5 billion last month, recovering to the US$10 billion range compared to the previous month.
Despite growing concerns about China’s economic downturn, including its real estate crisis and deflation, the export performance is more positive than expected. China is a crucial trading partner, accounting for over 20 percent of South Korea’s total exports. It also imports approximately 75 percent of South Korea’s intermediate goods.
The government is confident about an export rebound in the fourth quarter. During a meeting of the National Assembly’s Budget and Accounts Committee on Sept. 1, Deputy Prime Minister and Minister of Strategy and Finance Choo Kyung-ho stated, “Semiconductor exports appear to have hit bottom. It is a generally accepted view among specialized institutions that there will be a clear increase in semiconductor sales in September and October, and a stronger recovery is expected next year.”
Lim Hye-yoon, a researcher at Hanwha Investment & Securities, analyzed, “Thanks to the improvement in daily average semiconductor exports, combined with inventory depletion and reduction effects in the semiconductor sector, we can expect further recovery.”
The trade surplus is expected to further strengthen. On the same day, Kim Wan-ki, the director of the Trade and Investment Division at the MOTIE, said, “August may have had negative impacts on the trade balance due to seasonal factors but we expect a surplus trend to stabilize (even more) after September,” and added, “Key export items like automobiles and ships, which have been leading our exports, are showing positive signs, and the semiconductor industry’s situation is expected to gradually improve.”