Export decline shrinks in May

Korea’s exports fell 6 percent to $39.8 billion in May, the Ministry of Trade, Industry and Energy said on Wednesday, the longest streak of decline.

The rate of decline slowed significantly, but Korea’s exports began with a 1 percent decline in January 2015 and plummeted to a double-digit decline for the first time in six years in May 2015.

The continuous fall of exports has led many think tanks, most recently the National Assembly Budget Office, to lower their economic outlook for Asia’s fourth-largest economy to the mid-2 percent range.

Korea’s economy is heavily dependent on shipping its products and services overseas.

Exports of major products, including ships, wireless telecommunication equipment, which includes smartphones, as well as automobile and semiconductors, continued to fall. All of these have been the major driving forces behind Korea’s exports since the global crisis of 2008.

Ship exports fell 16.6 percent over last year, adding to the struggles of the industry. Wireless telecommunications equipment exports dropped 11.8 percent, while mobile phones alone plummeted 26.5 percent. Automobile exports declined 7.1 percent and semiconductor fell 4.1 percent.

With exports shrinking, the current-account balance surplus shrank to the smallest in more than two years. According to the Bank of Korea on Wednesday, the current-account surplus in April amounted to $3.37 billion. The current-account balance has been enjoying a surplus rally for 50 consecutive months. However, the surplus size is the smallest since January 2014, when it was $1.87 billion.

However, the ministry considers the decline in May as a recovery indicator, considering that in April, the exports drop was much sharper at 11.2 percent. In fact, this was the first time in two months that exports fell in the single digits.

The last time was in March, when outbound shipment retreated 8.2 percent.

“By volume, exports continued to grow for the second consecutive months especially in petrochemical and petroleum products,” said Jeong Seung-il, head of the trade investment bureau at the ministry.

“When converting the export value in won, outbound shipment grew 0.9 percent, which is the first turnaround in eight months since September last year.”

Until Tuesday, the government estimated that export in the first 20 days of last month grew 2 percent compared to the same month last year. However, the trade ministry said this was largely because in the first 20 days last month there were roughly two days more working days.

When asked whether exports last month saw a slower drop largely because last year exports saw a sharper drop of 11 percent, the ministry admitted that to some extent, it did help ease the fall.

However, it added that when looking at some of the data that are less sensitive to last year, there are indications that the situation is improving.

One of the data is the daily average export value, which last month was the highest in a year at $1.85 billion.

The Bank of Korea also said that the shrunken current-account balance surplus was largely contributed by the financial payment delivered to foreign investors, including dividend handouts, which were concentrated last year. This indicates that the surplus will increase for May’s data.

However, the government remained cautious over its speculation on June exports, with many negative factors still lingering, including the interest rate increase by the U.S. Federal Reserve this month.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]