SINGAPORE (ICIS)--South Korea’s exports growth will continue to be supported by the global economic recovery this year despite the sharp slowdown seen in February, according to analysts.
The country’s overall exports rose by 4.0% year on year to $44.9bn in February, decelerating from the 22.2% gain in January this year. South Korea’s exports account for around half of its economy.
The drop in exports in February was mainly due to an unfavourable base effect as the Lunar New Year fell in February this year as opposed to in January last year, Japan-based Nomura Global Markets Research said in a note.
The country’s imports, meanwhile, rose by 14.8% year on year to $41.6bn in February, resultm 9.5% in Jaing in a trade surplus of $3.31bn. South Korea’s trade balance has now stayed in the black for 73 straight months.
For the first 20 days of February, South Korea’s petrochemical exports dipped by 0.5% year on year while petroleum shipments abroad rose by 29.7%. Full-month figures were not immediately available.
Exports of automobiles, a key consumer market for chemicals, fell by 16.2% year on year during the same period.
South Korea’s exports of petrochemicals in January rose by 18.4% year on year to $4.2bn “due to a rise in export prices caused by the oil price surge”, its Ministry of Trade, Industry and Entergy (MOTIE) said.
By destination, South Korea’s exports to Asia Pacific and the EU remained strong, offsetting weaker shipments to the US
“Despite US trade protectionism, we believe the synchronised global economic recovery (especially the capital expenditure upcycle) should continue to support Korea’s exports for the rest of this year,” Nomura said.
Higher US import tariffs on steel, solar cells, washing machines and aluminium should have a negative impact on those segments in South Korea, “but given they represent a relatively small share of total exports (less than 1%), we do not expect this to derail Korea’s overall export momentum”, it said.
Any increase in tariffs or quotas in those segments are expected to have only a limited impact on Korean exports this year, Nomura said.
“The external sector contributes significantly to the Korean economy and there is reason to be optimistic about the sector this year,” said Spain-based FocusEconomics in its March Consensus Report for East and South Asia.
A healthy global economy should also support demand for South Korean semiconductors, general machinery and petrochemicals, it said.
“There are potential obstacles to the sector’s economic contribution, however, including a strong Korean won and more restrictive trade policies abroad,” it added.
The headline Nikkei South Korean manufacturing purchasing managers’ index (PMI) dipped to 50.3 in February from 50.8 in January, signalling a marginal improvement in business conditions for domestic producers.
New business received by South Korean manufacturers increased for a ninth month in a row, with greater order book volumes driven by both domestic and overseas clients, the Japanese media group said.
“New export orders rose in February, with Australia, China and the US all mentioned as sources of external demand,” it added.
Interactive and focus article by Nurluqman Suratman