After growing 3.1% in 2022, South Korea‘s exports (merchandise only, no services) will rise 0.5%, at year-on-year rates, according to the Bank of Korea.
Then, according to its forecast, these exports will increase 3.4% in 2023.
Exports reversed their downward trend, as semiconductor exports declined substantially due to falling semiconductor unit prices and weak demand from downstream industries, and continued sluggish exports to China.
Since January, exports have continued their downward trend and the recovery in private consumption and facility investment has weakened.
The Bank of Korea expects South Korean exports to continue to slow for a considerable period due to sluggish global demand, but will gradually improve from the second half of this year thanks to the recovery of the Chinese economy and the IT industry.
In addition, the bank projects the current account surplus to narrow slightly from a year earlier due to a widening services deficit.
The goods account is also likely to remain in the red and gradually improve with the easing of sluggishness in the IT sector from the second half of this year, while the services account will see a significant increase in the deficit due to increased overseas travel by residents.
South Korea’s exports
Korea’s economic growth continued to slow due to sluggish exports, although the recovery trend in private consumption resumed.
Thus, real GDP growth in the first quarter of 2023 went on to increase 0.3 percent from the previous quarter, driven by private consumption, but its year-on-year growth (+0.9 percent) was lower than in the fourth quarter of last year (+1.4 percent).
By sector, private consumption increased thanks to the additional lifting of Covid-19 restrictions.
Meanwhile, facility investment contracted due to the slowdown in the IT industry, and exports continued their year-on-year downtrend as exports to China remained sluggish due to limited spillovers from China’s reopening, amid a significant decline in semiconductor exports stemming from falling semiconductor prices and weak downstream demand.
In April, with the continuation of the downward trend in exports, consumption experienced an adjustment.