Trade stats show dip in exports in August

The nation’s current-account surplus shrank to the lowest amount in seven months, setting off alarms over a weakening of its export performance.

According to the Bank of Korea yesterday, the current-account balance recorded a surplus of $400 million in August, the lowest since January, when the surplus was $150 million.

The central bank said the biggest factors were slowing exports and swelling imports.

The current-account balance has been in surplus for 18 consecutive months.

The trade surplus plunged from $4.73 billion in July to $480 million in August.

Although exports grew 25.9 percent from a year earlier, they fell 6.6 percent from July’s $48.6 billion to $45.8 billion last month.

Imports during the same period grew 28.9 percent from the previous year and 2.6 percent from the previous months. Imports in July and August were $43.8 billion and $45.3 billion, respectively.

In particular, Korea’s IT exports fell sharply. Semiconductor shrank 13 percent from the previous year and display panels plummeted 22.1 percent on-year.

There are growing concerns that exports, which were the engine that pulled the Korean economy out of the 2008-9 global financial crisis, would start to slow as the world economy teeters on the brink of recession.

Various economic institutions have started to lower their forecasts of global economic growth and Korea’s performance.

The IMF lowered IT global economic growth outlook for this year from 4.3 percent to 4 percent. The IMF also reduced Korea’s growth forecast from 4.5 percent to 4 percent.

The Ministry of Strategy and Finance, however, remains optimistic that the economy will achieve 4.5 percent growth this year.

Experts say if Europe fails to bail out Greece and the country goes into default, Korea’s exports will inevitably be affected since Europe takes 9.1 percent of Korea’s outbound shipments.

Yet the government is downplaying such fears saying that in recent years, and particularly since the global financial crisis, Korea has diversified its export markets and no longer depends so heavily on advanced countries’ markets. In fact, Korea’s exports to Southeast Asian countries now account for 22.6 percent of total exports. China is currently Korea’s largest export market, accounting for 25.4 percent.

Exports to the U.S. account for only 9.4 percent of the total while Japan accounts for 7.6 percent.

In a recent report, LG Economic Research Institute wrote that if a global recession hits, exports of consumer durables and product parts will be affected. The report said that even exports to emerging markets will be hit as the global economy is now more integrated than ever. The central bank, however, said the drop in the trade surplus in August was a temporary phenomenon affected by seasonal factors.

“Exports of semiconductors and liquid crystal displays have been struggling, but other exports continued to show favorable growth this month,” said Yang Jae-ryong, the Bank of Korea’s monetary and financial statistics director.

“Most summer vacations were concentrated at the end of July and beginning of August and as a result many of the production lines at plants were idle,” Yang said. He stressed that the average current-account surplus between July and August was $2.1 billion, which is more than the monthly average of $1.4 billion between January and August.

“The current-account surplus [in August] shrank because of special factors and therefore [the current-account balance] should be judged by the monthly average rather than August alone,” Yang said. “Even if the surplus in September is zero, the current-account balance will easily achieve $15.5 billion by the end of this year.”

Earlier this week at a National Assembly annual audit, BOK Governor Kim Choong-soo expressed confidence that Korea is well prepared to weather the financial uncertainties in Europe, and that the nation’s current-account balance would continue to post surpluses throughout this year.

By Lee Ho-jeong [ojlee82@joongang.co.kr]