As exports struggle, gov’t tries to lend a handThe Korean government announced more trade support measures as it combats an export slump and stiff headwinds in global trade.
Minister of Economy and Finance Hong Nam-ki said Monday that the government will provide support for companies to win global infrastructure projects and build stronger ties with Southeast Asian trade partners in a bid to boost exports.
“To increase orders for overseas infrastructure projects, the government will swiftly introduce a 1.5-trillion-won [$1.3-billion] fund for global plant, infrastructure and smart city projects,” said Hong during a meeting with other ministers at the Seoul government complex.
“We will continue to expand our economy’s global expansion by signing a free trade agreement with Malaysia and a comprehensive economic partnership agreement with Indonesia by the end of this year.”
The government plans to commit 500 billion won from the infrastructure fund to support companies bidding on overseas smart city projects. Smart city infrastructure includes connected mobility, telecommunications and health-care technologies.
The government plans to expand the fund to 3 trillion won over the long term.
The finance minister added that the government will announce an additional plan to revamp the country’s export market infrastructure by the end of this month through measures such as improving digital trade.
The announcement came as the government scrambles to stimulate exports after the country recorded the seventh consecutive month of on-year declines for exports last month.
Exports in the first half of this year fell 8.5 percent compared to the same period the previous year with the government blaming weak global demand for semiconductors and the U.S.-China trade dispute.
The country faces new global trade friction after Japan restricted exports to Korea of key materials used in semiconductors and displays last Thursday.
Japan’s measure, seen as retaliation in the two countries’ dispute over forced labor during the colonial period, could impede production of Korea’s two major export industries.
Investment bank Morgan Stanley said in a recent report that the country’s gross domestic product (GDP) could be dented by the restrictions.
“Korean producers can first draw down on excess inventory of raw materials or finished goods to maintain market share, but the GDP impact would show up in inventory destocking and slower production due to input constraints,” said the investment bank.
Citing other headwinds such as the U.S.-China trade conflict, Morgan Stanley forecast Korea’s GDP growth for this year at 1.8 percent, far lower than the government’s outlook of 2.4 percent to 2.5 percent.
“Korea is one of those economies […] most exposed to lingering U.S.-China trade uncertainties given its relatively high trade linkages with China and its export orientation,” said the investment bank.
Despite increasing trade concerns, global credit rating agency Moody’s maintained its Aa2 stable rating for Korea on Monday.
“Very strong economic and fiscal fundamentals provide buffer against exposure to uncertain outlook for external trade,” said Moody’s in a report.
BY CHAE YUN-HWAN [firstname.lastname@example.org]