Exports firm up prospects for Korea

With shipments for last month at annual 7.1pc gain, momentum in the economy is building, but key industries face risks from weak yen

PUBLISHED : Wednesday, 01 January, 2014, 2:57pm
UPDATED : Thursday, 02 January, 2014, 5:40pm

South Korean exports grew by an annual 7.1 per cent last month, beating forecasts and pointing to Asia's fourth-largest economy sustaining momentum into the new year. However, there are increasing concerns about the impact of a weak Japanese yen.

Several of South Korea's big industries - vehicles, ships and steel - compete fiercely with Japanese rivals, and authorities are worried that the South Korean won's rise to a five-year high against the yen will hurt their competitiveness.

Shipments from South Korea, the world's seventh-largest exporter, rose to US$48.1 billion last month, while imports grew an annual 3 per cent to US$44.4 billion.

That led to a trade surplus of US$3.7 billion, data from the Trade, Industry and Energy Ministry showed yesterday.

Export growth was slightly stronger than the median forecast of 6.4 per cent in a Reuters poll, and well above the 0.2 per cent recorded in November.

The data is another sign of economic momentum that should be maintained into this year.

The Bank of Korea expects quarterly economic growth of at least 0.8 per cent in the fourth quarter, in seasonally adjusted terms, following expansion of 1.1 per cent in the two prior quarters.

For the full year, exports grew 2.2 per cent, while imports shrank by 0.8 per cent, resulting in a trade surplus of US$44.2 billion. The finance ministry expects exports to grow by 6.4 per cent this year, benefiting from a gradual global recovery.

State-owned Export-Import Bank of Korea has said it expects exports in the first quarter to grow by about 10 per cent from a year earlier because of better external conditions.

That would be double the growth of 4.8 per cent in the final quarter of last year, which was the best growth in two years, Reuters calculations show.

Indeed, exports to the United States rose by an annual 13.2 per cent last month, while exports to China rose by 8.4 per cent. Shipments to the European Union rose 2 per cent.

However, Seoul is concerned about the impact on its exporters of the depreciation of the yen as Tokyo uses massive fiscal and monetary stimulus to try to escape deflation.

This week, bid rates for the yen fell to a five-year low under 10 won, and it has weakened by nearly 30 per cent against the South Korean currency over the past 15 months.

The deputy finance minister expressed concern about the yen's rapid decline, and the trade ministry warned yesterday that the weak yen poses a threat to exports.

Policymakers have said they will consider countermeasures, although they have declined to elaborate. Currency dealers suspect the authorities could buy US dollars to indirectly keep the won from rising further against the yen.