Foreign banks gloomy on second-half exportsDespite the Korean government’s optimism that the tides will turn for exports in the second half of the year, major foreign investment banks think otherwise.
Barclays, Citi and Nomura and other major foreign investment banks project that Korea’s exports will continue to struggle in the second half of the year on the back of sluggish global demands and the downward pressure over major export items, the Korea Center for International Finance said on Thursday.
Goldman Sachs, Bank of America and Merrill Lynch expect the global export market to struggle to see a momentum as the U.S. economy in the second quarter was weaker than expected and the European economy slowed. Economic indicators released earlier this week also indicated a slowdown in China as well.
Barclays was the only financial institution that projected that Korea’s exports will likely see a slower decline or turnaround this month, due to longer working days compared to a year ago.
There are 24 working days this month compared to 22.5 days a year ago.
The Bank of America also noted the negative impact on the won-yen exchange. While the Korean won depreciated against the U.S. greenback as its value weakened 5.3 percent from the beginning of the year to the 1,100 won range, when compared to the Japanese it appreciated 11 percent.
The grim outlook comes at a time when Korea’s exports saw their decline widen last month. In July, Korea’s exports for the first time in three months posted a double-digit decline as the figures shrunk 10.2 percent compared to the same period a year ago. The last time the nation’s outbound shipment fell that much was in April when it retreated 11.1 percent.
Although last month continued a losing streak of 19 consecutive months, the Korean government said it was confident of a turnaround as the decline was largely attributed to short-term factors including low crude prices and labor strikes in the automotive industry. Additionally the government announced plans late last month for financial aid to small and midsize companies including exemptions on trade insurance to bolster Korea’s exports.
“We believe the global economy and trade will improve in the second half of this year compared to the first half,” Lee Min-woo, director of Trade Ministry, said Aug. 1 when the government announced export results. “The government will try to help exporters in a variety of ways including financial supports and incentives, so they can enter foreign markets more easily and diversify export items.”
However, according to the report by the Korean finance center foreign think tanks are questioning since last month’s export turned out to have fallen much sharper than what the consensus projected. According to a Bloomberg survey before the Aug. 1 announcement foreign banks projected Korea’s export would fall 6.7 percent year-on-year.
BY LEE HO-JEONG [email@example.com]