Korea can expect 7.9 percent export surge as chips rebound next year

Industry

Published: 30 Nov. 2023, 18:25

Korea can expect 7.9 percent export surge as chips rebound next year

Koo Ja-yeol, chairman of the Korea International Trade Association, speak at a press briefing in southern Seoul on Wednesday. [KITA]

Korea's exports will likely jump by 7.9 percent next year as demand for semiconductors, the country’s mainstay export item, is expected to rebound, according to a trade association.

The Korea International Trade Association (KITA) announced its projection Wednesday alongside this year's estimates.

Sunnier spells are forecast for next year as KITA expects Korea to log a trade surplus of $14 billion after recording two years of trade deficit.

Export volume is expected to rise 7.9 percent on year to $680 billion and import volume to increase 3.3 percent to $666 billion.

The global economy outlook for 2024 is expected to experience a low growth rate in the upper 2 percent range, while the volume of world merchandise trade is projected for a growth rate in the low 3 percent range.

The won-dollar exchange rate is projected to fall to the mid-1,200 won range, while the international oil price is expected to rise due to geopolitical risks involving Israel and Hamas alongside the rise in global demand for travel.

The average price of Brent crude oil is predicted to reach $90 a barrel, up 4.65 percent compared to an estimated $86 per barrel this year.

For this year, Korea is expected to post a trade deficit of $15 billion amid the global economic slowdown, affected by the fall in export volume of chips and also from China, Korea’s largest trade partner.

Exports for this year are expected to fall 7.8 percent on year to $630 billion and imports to sink 11.8 percent to $645 billion, according to data from KITA.

The deficit figure was reduced by $32.2 billion compared to 2022. Sluggish exports are attributed to the decline in demand for IT products due to the resumption of offline activities as the Covid-19 pandemic dwindled.

Electronic components and devices, such as chips, computers, displays and wireless communication devices accounted for 80.5 percent of the decrease in the overall export volume from January to October.

Meanwhile, demand and supply for EVs, batteries and cathode materials surged, jumping 34.9 percent on year for the January-October period.

The trade landscape is shifting as Korea's reliance on China for exports is dimming, the KITA report found.

The gap in export volume between China and the United States has been reduced to 1.8 percentage points, with China narrowly taking the lead by taking up 19.8 percent of the total export volume for the 10-month period. Last year, the gap was 6.7 percentage points.

“Based on our analysis, we do not believe that China will take up a dominant lead in our export volume in the future,” said Cho Sang-hyun, the head of KITA’s Institute for International Trade, at a press beefing in southern Seoul on Wednesday. “Exports to China may recover in the long run but will be slower and more stabilized compared to the past. The global trade market is anticipated to rapidly change next year due to the U.S. market because of the presidential election coming up next November, which may lead to changes in trade policies and affect our market.”

The association anticipates a turnaround in trade from the fourth quarter due to a surge in demand for AI chips and other IT products.

“We anticipate explosive demand for next-generation chips and solid-state drive [SSD] products driven by growth in the global AI business,” Cho said.

BY LEE JAE-LIM [lee.jaelim@joongang.co.kr]