South Korea witnessed a sharp decline in exports during the first 20 days of May, further exacerbating the challenges faced by its trade-dependent economy. According to data released by the Korea Customs Service (source), outbound shipments fell by 16.1% compared to the same period last year, amounting to $32.4 billion. Imports also experienced a significant drop of 15.3%, reaching $36.7 billion, resulting in a trade deficit of $4.3 billion.
The country’s exports have been on a downward trajectory for seven consecutive months, marking the longest losing streak in three years. The prevailing slump in the global chip industry played a prominent role in this decline. Chip exports, which are vital to South Korea’s economy, plummeted by 35.5% to $4.26 billion. Furthermore, other key export sectors, including petroleum products and steel, experienced substantial decreases of 33% ($3 billion) and 7.5% ($2.9 billion), respectively.
While overall exports to major markets suffered, there were some exceptions. Shipments to the United States and the European Union decreased only marginally by 1-2%. In contrast, exports to China, the largest overseas customer, dropped by 23.4% to $6.79 billion, despite hopes surrounding its reopening. Exports to Vietnam and Japan also declined, falling by 15.7% and 13.9% respectively.
Amidst this challenging environment, the automobile sector offered a glimmer of hope, as it recorded a significant surge in exports. Automobile shipments surged by 54.7% to $3.44 billion during the aforementioned period.
The sustained decline in exports has contributed to a widening trade deficit for South Korea. The cumulative trade deficit for the year, as of Saturday, reached $29.5 billion, surpassing half of the record annual trade deficit of $47.8 billion in 2022. These figures underscore the pressing need for proactive measures to revitalize the country’s export-oriented economy.
South Korea’s trade landscape remains vulnerable due to faltering global demand and the prolonged downturn in the chip industry. Addressing these challenges will require a multifaceted approach, including efforts to diversify export markets, enhance competitiveness in emerging sectors, and strengthen domestic consumption. In addition, fostering innovation and investing in research and development will be crucial for South Korea to maintain its global leadership in advanced technology industries.