The Bank of Korea: "Even if IT sector weakness eases in the second half, a sharp rebound in exports like in the past is unlikely"

The Bank of Korea explained that while exports are expected to gradually improve as the IT sector downturn eases in the second half of the year, it will be difficult for exports to rebound sharply as in the past due to structural changes in the Chinese economy.

On the 21st, the Bank of Korea made this forecast about the future outlook of South Korea's exports through a BOK Issue Note titled "Recent Characteristics and Implications of Our Exports."

Since the COVID-19 pandemic, South Korea's exports, like those of other Asian countries highly dependent on IT and China, have been sluggish, but signs of easing downturn have appeared in the second quarter.

By product category, IT items centered on semiconductors continue to show a sharp decline, while automobiles and ships are showing favorable performance.

In the first half of the year, the year-on-year growth rates of exports showed large decreases in IT items such as semiconductors (-37.4%) and displays (-29.0%). Among non-IT items, chemical products (-13.6%), petroleum products (-19.5%), and steel and metals (-13.5%) also showed significant declines. However, automobiles (30.9%) and ships (11.8%) continued to perform well, and machinery was relatively favorable.

The Bank of Korea explained, "The differentiation by product category is due to the fact that items sensitive to the global economy are sluggish, while items influenced by individual unique factors such as supply disruption improvements and eco-friendly transitions are showing favorable performance."

By region, exports to China and ASEAN are sluggish, but exports to the United States and the European Union (EU) are relatively favorable.

In the first half of the year, year-on-year export growth rates showed sharp declines in China (-26.0%), ASEAN-5 (-21.4%), and Japan (-10.7%), while the United States (0.3%), EU (4.9%), and the Middle East (14.0%) continued their recovery trend.

As this trend has continued for over a year, the share of exports to the United States expanded to 17.9% in the first half, the highest level since 2002 (20.2%), narrowing the gap with China (19.6%) to 1.7 percentage points.

The Bank of Korea expects that as the IT sector downturn eases, exports will gradually improve and the differentiation by product and region will also narrow. Considering the export structure, if the global IT economy recovers, improvements in exports to China and ASEAN, which have a high IT share, are expected, and automobile exports are likely to continue a moderate increase centered on the United States and the EU.

However, even if the IT sector downturn eases after the second half, it is expected to be difficult for exports to rebound sharply as in the past due to structural factors such as changes in industrial structure and competitiveness by country.

The Bank of Korea judged that in this situation, economies and companies highly dependent on specific regions or products will inevitably be vulnerable to changes in external conditions, so the incentive for export diversification will increase further.

The Bank of Korea explained, "Since China is expected to become increasingly important as a consumer market in the future, it is necessary to diversify the export structure to China, which is concentrated on intermediate goods, to final goods and others. In the case of the United States and the EU, considering the movement to strengthen regional supply chains, efforts to secure technological competitiveness are deemed essential."

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