The Bank of Korea: "Ukraine Crisis and EU Growth Slowdown as Factors Reducing Automobile Exports"

[Image source=Yonhap News]

[Asia Economy Reporter Seo So-jeong] As the economic growth of the European Union (EU) slows down due to the Ukraine crisis, it is expected to have a negative impact on the export of automobiles, a major export item of South Korea.

In a report titled "The Impact of the Ukraine Crisis on the EU Economy and Korea-EU Trade" published on the 8th in the Bank of Korea's Overseas Economic Focus, it was predicted that "the slowdown in EU growth is expected to act as a factor reducing our exports, and disruptions in parts procurement leading to decreased automobile production will also negatively affect exports of some items."

The Ukraine crisis is expected to slow the EU's economic growth through reduced exports from Russia and Ukraine, production disruptions and price increases due to decreased imports, and weakened economic sentiment. The slowdown in the EU economy's growth rate is expected to be more affected by income reduction factors such as supply chain disruptions and expanded inflation than by poor export performance.

According to the Bank of Korea, if the EU growth rate falls by 1 percentage point, the nominal export growth rate to the EU is analyzed to decrease by about 2-3 percentage points (USD 1.27 billion to 1.91 billion, based on 2021), and the real export growth rate by about 1 percentage point.

Also, production disruptions in the EU (automobiles) are expected to negatively affect exports of some items (such as batteries and automobile parts), but are expected to act as a positive factor for finished car exports.

In particular, if the global supply chain disruptions deepen and production of semiconductor manufacturing equipment, automobile, and ship parts in the EU is disrupted, it is likely to have a negative impact on South Korea's key export industries.

A Bank of Korea official said, "While striving to prevent the negative effects of the slowdown in the EU economic recovery on our exports from leading to weakened competitiveness of export companies, it is necessary to continuously provide policy support to help Korean export companies secure inventory by closely monitoring the possibility of production disruptions of semiconductor manufacturing equipment and key ship and automobile parts procured from the EU."

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