Concerns Rising over Exports and Deflation

The Export-Import Bank of Korea announced on May 10 that South Korea’s Q1 exports fell 1.4 percent from a year ago and 3.7 percent from the previous quarter. In addition, its Q1 export condition evaluation index, 70, fell 18 points from a year ago and 24 points from the previous quarter. The index is the lowest since the first quarter of 2009, when a global financial crisis broke out.

The bank also announced that South Korea’s Q2 exports are estimated to decrease by 15 percent year on year. For reference, the exports showed a year-on-year decline of 25.2 percent in the first quarter of 2009 and a year-on-year decline of 13.8 percent in 2009 as a whole.

The World Trade Organization recently said that this year’s global goods trade volume is likely to fall 12.9 percent to 31.9 percent due to the COVID-19 pandemic. The Export-Import Bank of Korea added that the volume is expected to rebound in summer based on various economic stimulus measures and freer movements of people and goods.

In the meantime, deflationary concerns are rising due to decreasing demands. For instance, the OECD’s core inflation index excluding food and energy edged up 0.1 percent year on year last month, the weakest increase since December 1999.