South Korea's Q2 Exports Expected to Decline Due to COVID-19... EBSI Falls Below 80 for the First Time in 7 Years

[Asia Economy Reporter Hwang Yoon-joo] Due to the impact of the novel coronavirus infection (COVID-19), the export industry's sentiment has worsened, leading to forecasts of a decline in exports in the second quarter.

According to the "2020 Q2 Export Industry Business Outlook Survey" conducted by the Korea International Trade Association's International Trade and Commerce Research Institute targeting 915 domestic export companies, the Export Business Sentiment Index (EBSI) for the second quarter was 79.0. This is the first time in seven years since Q1 2013 (78.4) that the index has fallen below 80. An index below 100 indicates that export conditions are expected to worsen compared to the current situation.

By product category, exports are expected to deteriorate in most items including petroleum products (59.7), steel and non-ferrous metal products (61.2), wireless communication devices (63.2), machinery (67.1), automobiles (71.2), and semiconductors (77.0).

The report cited sluggish overseas demand due to the COVID-19 outbreak, production stoppages, and disruptions in raw material procurement caused by transportation restrictions as the background for the worsening conditions.

On the other hand, exports of ships (124.7), home appliances (104.7), and agricultural and marine products (103.3) are expected to improve somewhat or remain at similar levels to the previous quarter. The increase in deliveries of key ship types such as liquefied natural gas (LNG) carriers and very large crude carriers (VLCC), recovery in shipbuilding orders, and increased preference for Korean-made home appliances and agricultural and marine products are expected to contribute to export growth.

All categories recorded scores below 90, indicating an overall deterioration in export conditions. In particular, 'international supply and demand situation' (68.5), 'economic conditions of export destination countries' (72.7), and 'manufacturing costs of goods' (78.8) are expected to worsen significantly.

The main export difficulties faced by companies in the second quarter were 'economic downturn in export destination countries' (17.2%) and 'rising raw material prices' (14.9%), followed by 'buyers' demands for price reductions' (12.1%) and 'increased logistics costs' (10.8%).

Kang Sung-eun, a researcher at the International Trade and Commerce Research Institute, said, "Due to the global spread of the COVID-19 virus, sluggish global demand and economic uncertainty are expected to continue for some time," adding, "Policy cooperation between the government and related organizations is urgently needed to minimize export damage."

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