South Korea’s exports rose nearly 8 percent in November, marking the second month of growth after October. According to November import and export trends released by the Ministry of Trade, Industry and Energy (MOTIE) on Dec. 1, exports reached US$55.8 billion last month, up 7.8 percent from the same month of 2022.
The nation’s exports of 12 of the 15 major export items increased, breaking the record for the largest number of items with export increases this year. In particular, semiconductor exports swelled by 12.9 percent, turning positive for the first time in 16 months since August last year. The growth of semiconductor exports in November was driven by memory semiconductors, with fixed prices that have been rising since October, including a 36.4 percent surge in exports of memory semiconductors, the MOTIE analyzed.
Exports increased to six of the nine major export markets, with exports to China, South Korea’s largest export market, posting its best performance of the year at US$11.4 billion (a year-on-year decrease of 0.2 percent), making November the fourth consecutive month of over US$10 billion. Exports to the United States were also positive for the fourth consecutive month, reaching a record US$10.9 billion. Exports to the ASEAN were positive for the second consecutive month, reaching US$9.8 billion. Exports to the EU also reached US$5.5 billion, turning to the plus side.
Imports in November fell by 11.6 percent, driven by a decline in energy imports (a drop of 22.2 percent), including crude oil (a drop of 2.7 percent), gas (a drop of 45.0 percent), and coal (a drop of 40.0 percent). The trade balance has been in surplus for six consecutive months since June of this year, with a surplus of US$3.8 billion, the largest in 26 months since US$4.28 billion in September 2021 thanks to a recent improvement in exports.
Against this backdrop, as exports to China continue to decline for the 18th month in a row and show no clear signs of recovery, South Korea’s annual trade deficit with China is expected to reach a record high of nearly US$20 billion this year. It will be the first time in 31 years since 1992 if South Korea records a deficit in trade with China.
South Korea’s exports to China fell 0.2 percent year on year to US$11.36 billion in November, according to the MOTIE and the Korea Customs Service on Dec. 2. The 18th consecutive month of South Korea’s declining exports to China pulled down South Korea’s trade balance with China to a deficit of US$730 million in November.
With the addition of the US$17.7180 billion trade deficit from January through October of this year, South Korea’s cumulative trade deficit with China crossed US$18 billion. By the end of the year, the trade deficit is likely to reach US$20 billion.
The last time Korea’s trade balance with China was in the red was in 1992 when the deficit amounted to US$1.071 billion. Since then, it has been in surplus for 30 years.
The magnitude is also historic. The largest deficit since the start of South Korea’s trade with China was in 1991 when the trade deficit hit US$2.43804 billion. This year, however, it has already surpassed the US$18 billion mark, even considering last month’s preliminary figures, and may further expand before the end of this year.
Despite this situation, the Korean government is optimistic. The MOTIE announced that South Korea’s exports to China hit the highest level of the year in November. This was attributable to a rebound in exports of key items such as semiconductors and wireless communications.
In particular, exports of semiconductors, Korea’s largest export item, switched to an increase for the first time in 16 months last month, ending a negative trend. Semiconductor exports have been recovering since hitting a low in the first quarter of last year and reached US$9.52 billion last month, up 12.9 percent from a year before.
The Korean government says Korea has gained momentum to continue export growth next year, but analysts say that the story is far from certain. “There is a limit to how much Korea’s exports can improve under conditions where the Chinese economy does not improve and that limit is still affecting Korea’s exports now,” said Sung Tae-yoon, a professor of economics at Yonsei University. “It is correct to say that Korea’s exports are not on the decline but it is still difficult to see that they are ascending.”