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South Korea’s Annual Exports, CAPEX and Economic Growth Likely to Fall This Year
A Gloomy Forecast for Korean Economy
South Korea’s Annual Exports, CAPEX and Economic Growth Likely to Fall This Year
  • By Jung Suk-yee
  • June 25, 2019, 08:47
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The Korea Institute for Industrial Economics & Trade forecasts a 5.9 percent decline in South Korea’s exports and a 6 percent decline in capital expenditure this year.

The Korea Institute for Industrial Economics & Trade announced on June 24 that the ongoing global economic recession and U.S.-China trade war are likely to lead to a 5.9 percent decline in South Korea’s exports and a 6 percent decline in capital expenditure this year.

“In South Korea’s 13 key industries, the combined exports are forecast to fall 7.4 percent in the second half of this year, led by the ongoing slumps in the IT and material industries, and South Korea’s trade surplus is likely to show a significant decline this year with exports falling more rapidly than imports, which are predicted to fall 1.5 percent this year,” the institute explained.
 

It estimated South Korea’s economic growth for this year at 2.4 percent. 0.3 percentage point lower than the previous year, with regard to the trade war negatively affecting the export, investment and consumption sides. “This year’s average international oil price is estimated at US$66 per barrel, down 4.7 percent from a year ago, in view of a limited crude oil demand and this year’s average won-dollar exchange rate is estimated at 1,150 won per U.S. dollar,” it continued to say.
 

The institute mentioned that South Korea’s semiconductor exports are forecast to fall 21.3 percent this year. “The unit prices of memory chip products are unlikely to rebound in the second half and the anti-Huawei campaign is negatively affecting the semiconductor exports,” the institute said, adding, “Although South Korean products can be a substitute with Micron Technology stopping supplying its DRAM to Huawei, Huawei’s production cut will more than offset the effect.” At present, Huawei represents 12 percent and 3 percent of the annual sales of SK Hynix and Samsung Electronics, respectively.

As for the automobile industry, export unit prices are expected to rise based on SUVs and green cars, yet the annual growth is likely to fall to 0.9 percent. Ship exports are expected to increase 0.6 percent with a number of gas carriers and very large container carriers scheduled to be delivered in the second half after contract signing in 2017 and 2018.
 

Steel exports are forecast to decrease 3.5 percent in the second half. The international steel prices are falling these days while Southeast Asian steelmakers are increasing their domestic production to cause more competition in Southeast Asia and China.
 

Petrochemical exports are likely to show a decrease of 5.8 percent this year with China’s import demand on the decline amid the trade war and China’s higher tariffs causing American products to flow into Southeast Asian markets to lead to more competition.
 

South Korea’s total production is likely to remain sluggish in the second half due to declines in exports and domestic consumption. Semiconductor production, in particular, is estimated to fall 18.7 percent due to an increase in inventory and sluggish exports.