COVID-19 Cases Increasing Daily, but Are Exports Improving? The Reason Behind It

Despite Rising Cases, Countries Lift Lockdowns... Due to COVID-Economy 'Decoupling'
Government Lockdown Measures and Response Index Declining Daily

[Image source=Yonhap News]

[Asia Economy Reporter Kim Eunbyeol] Despite the ongoing global spread of the novel coronavirus infection (COVID-19), why are South Korea's exports improving? Experts find the answer in the phenomenon of 'COVID-19-economic decoupling.' In the early stages of the COVID-19 outbreak, countries locked down and imposed lockdown measures, causing trade to shrink significantly. However, now coexistence with COVID-19 is inevitably recognized to some extent, and lockdown measures have been lifted despite the spread of COVID-19. The issue is how long this precarious balancing act can continue. Ultimately, lifting lockdown measures inevitably leads to the spread of COVID-19, and given the nature of COVID-19, once the number of infections exceeds a certain level, confirmed cases increase exponentially, forcing a return to lockdown measures.

According to the Bank of Korea on the 5th, the current account balance recorded a surplus of $7.45 billion in July. This is the largest surplus in nine months since October 2019 ($7.83 billion), with the surplus increasing by about 13% compared to the same month last year ($6.58 billion).

The improvement in the goods balance had a significant impact. Exports in July were $43.2 billion, down 10.8% year-on-year, marking a decline for five consecutive months. However, imports were $36.23 billion, with a larger decline (-14.2%) than exports. As a result, the goods balance surplus expanded by $790 million year-on-year to $6.97 billion. Lee Seong-ho, head of the Financial Statistics Department at the Bank of Korea's Economic Statistics Bureau, explained, "Exports to China rebounded in June, and exports to the United States improved in July, continuing the positive trend. Regarding imports, capital goods increased, but energy imports decreased due to falling crude oil prices."

Looking at export trends based on customs clearance, exports are still negative year-on-year but show signs of improvement. The Ministry of Trade, Industry and Energy announced on the 1st that exports (customs clearance basis) in August were $39.656 billion, and imports were $35.54 billion, down 9.9% and 16.3% respectively compared to the same month last year. This resulted in a trade surplus of $4.116 billion. The average daily export value, considering working days, was $1.83 billion, down 3.8% from the same period last year?the smallest decline since COVID-19. Monthly average daily decline rates after COVID-19 were -12.5% in February, -7.8% in March, -18.8% in April, -18.4% in May, -18.4% in June, and -7.1% in July, indicating a slight but continuing improvement.

Oxford University has quantified government responses to COVID-19 (such as lockdown measures) in the 'Oxford COVID-19 Government Response Tracker.' The level of response is declining in most countries, including the United States and Germany.

Although exports are improving, the number of confirmed COVID-19 cases worldwide continues to rise. According to Worldometer, the current global number of confirmed COVID-19 cases is 26,773,457, well over 26 million. More than 280,000 new cases are still reported daily, and the possibility of a second wave is being raised.

Ironically, lockdown measures in various countries are gradually being eased. According to the 'COVID-19 Government Response Tracker' created by Oxford University, the U.S. government's lockdown level, which exceeded 70 in May, has now dropped to the 60s. Before COVID-19, the U.S. lockdown level was between 0 and 4. The German government's response level, which affects exports to Europe, rose to 74 but has since fallen by more than 10 points.

In conclusion, while countries initially panicked and sacrificed economic activity, worsening trade conditions, now coexistence with COVID-19 has become inevitable, and trade is showing signs of normalization.

Bank of Korea Governor Lee Ju-yeol also stated at last month's Monetary Policy Committee meeting after freezing the base interest rate, "Despite the global increase in confirmed COVID-19 cases, since June, countries have responded by easing movement restrictions and resuming economic activities," describing this as a "decoupling phenomenon."

However, no matter how much the economy returns to normal, an unprecedented contraction in exports seems inevitable. The possibility of another pandemic wave like that in March and April cannot be ruled out, remaining a variable. In its August 'Economic Outlook Report,' the Bank of Korea forecasted that the current account surplus would remain at $54 billion, $3 billion less than the previous forecast of $57 billion, due to export declines. This would be the lowest since 2012 ($48.79 billion), when exports sharply declined due to the European fiscal crisis. Another concern is that semiconductor exports, which supported South Korea's exports during the initial 'panic buying' phase of COVID-19, have recently stagnated. According to market research firm DRAMeXchange, the fixed transaction price of server DRAM (DDR4 8Gb) products in August was $3.13, the same level as in July, but prices are expected to decline by more than 10% again in the fourth quarter.

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