Korea early trade shows further export drop as global woes mount

South Korea’s early trade data showed an export-slump persisting in December in the face of stffening global economic headwinds.

Shipments decreased 8.8% in the first 20 days of the month compared with a year earlier, the customs office said Wednesday. That compares with a 14% drop for the full month of November. The country posted a $6.43 billion trade deficit in the period.

Average shipments that exclude working-day differences also fell 8.8%. Chip sales declined 24.3% and exports to China tumbled 26.6%.

Korean exports have begun to drop in recent months as the world economy enters a slowdown under pressure from Russia’s continuing war in Ukraine, fallout from China’s lockdowns and global monetary policy tightening.

A downturn in memory chip demand is exacerbating trade weakness, prompting chipmakers and other industrial giants to recalibrate manufacturing plans. 

Weakening exports, rising commodity prices and sliding investor sentiment are among headwinds facing Korea next year. Industrial production has already weakened for four months in a row in the latest sign of a cooling economy.

The Bank of Korea last month downgraded its forecast for economic growth next year to 1.7% from 2.6% previously, pointing to weakening exports. Memory chips that account for the largest share of Korean products sold abroad are likely to regain momentum from the second half of next year, it said.

Korea’s exports will probably be 4% lower next year compared with 2022, for a total of $662 billion, while imports will fall 8%, according to a Korea International Trade Association forecast.

Separately, the nation will likely see a trade deficit of $13.8 billion in 2023, KITA said. Korea is this year on track to post its first annual trade shortfall since the global financial crisis.