Worst Export Performance in 10 Years... Government's 'Rosy Outlook' Due to Base Effect

Government to Fully Respond to Q1 Export Turnaround
Focus on 60% of Export Support in H1 Including 240 Trillion Trade Finance
Fiscal Support Shows 'Temporary Improvement'...Urgent Need for Fundamental Measures

Asia Economy DB=Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporters Kim Bo-kyung and Moon Chae-seok] Last year, South Korea's exports recorded the worst performance in a decade, prompting the government to set a goal of turning exports positive in the first quarter of this year. However, even if exports return to a recovery trend, experts point out that it is difficult to consider it a true rebound, as it is merely a bounce-back effect from last year's severe slump. The government plans to focus fiscal resources in the first half of this year, including increasing trade finance support for exporters to 240 trillion won, but experts emphasize that fundamental solutions are needed for export recovery.

According to the Ministry of Trade, Industry and Energy on the 2nd, South Korea's export value last year was $542.4 billion, down 10.3% from the previous year, marking the worst performance in 10 years. This double-digit decline in exports was the first since 2009 (-13.9%), when the global financial crisis had an impact.

Minister Sung Yun-mo of the Ministry of Trade, Industry and Energy set the timing for export rebound as February this year and pledged to make all-out efforts to achieve a positive turnaround in the first quarter. The government decided to concentrate 60% of export support capabilities in the first half of the year, including 240.5 trillion won in trade finance and 511.2 billion won in export marketing.

However, given the current trend, even maintaining the status quo would naturally lead to export improvement in the first quarter. This is due to the base effect. Exports in the first quarter of last year decreased by more than 8% compared to the same period the previous year. In particular, exports in February last year were $39.56 billion, down 11.1% from the same month the previous year. This was influenced by the decline in semiconductor memory prices, weak demand, and a reduction in working days due to the Lunar New Year holiday. This year, the Lunar New Year holiday falls in January. Considering the recovery trend in semiconductor prices, a rebound in February exports is expected to be not difficult.

The government also viewed external conditions positively, such as the first phase agreement in the US-China trade negotiations, recovery of exports to China, and the Purchasing Managers' Index (PMI) for China's manufacturing sector rising for five consecutive months.

However, experts suggest that it is important to build a trade structure resilient to uncertain external conditions by securing competitiveness of export companies, restructuring industrial sectors, and diversifying markets. They pointed out that large-scale fiscal policies such as government trade finance support may produce only a 'flash effect' and are not sustainable methods.

Professor Sung Tae-yoon of Yonsei University said, "While the semiconductor sector had a large impact on last year's poor export performance, other key industries outside semiconductors are also considerably weakened," emphasizing, "Before emerging countries like China catch up, industrial restructuring through technological innovation is necessary to create new added value." He added, "Trade finance support through government fiscal spending brings only temporary effects," and "Without efforts to improve labor costs and secure competitiveness for companies, fundamental export improvement will be difficult."

Professor Ha Jun-kyung of Hanyang University advised, "We must overcome the limitations of being dependent on external conditions such as global trade volume," and "It is necessary to develop new industries to enhance competitiveness and improve the export structure to be less sensitive to global economic fluctuations."

This content was produced with the assistance of AI translation services.