Korea: Merchandise exports decline for first time in two years in October

Merchandise exports fell 5.7% in annual terms in October, on the heels of September’s 2.7% rise. October’s outturn marked the sharpest fall since August 2020. Meanwhile, merchandise imports climbed 9.9% in annual terms in October (September: +18.6% yoy), marking the weakest reading since January 2021.

As a result, the merchandise trade balance deteriorated from the previous month, recording a USD 6.7 billion deficit in October (September 2022: USD 3.8 billion deficit; October 2021: USD 1.8 billion surplus). Lastly, the trend pointed down, with the 12-month trailing merchandise trade balance recording a USD 33.0 billion deficit in October, compared to the USD 24.5 billion deficit in September.

The decline in October was driven by a 17.4% drop in chip exports, which was provoked by weakening economic activity in China and a fall in semiconductor prices.

Analysts at Nomura commented on the trade outlook:

“With slowing global demand and inventory destocking, we expect the downturn in export growth to continue, accelerating the manufacturing-led recession and increasing downside risks to the current account, which we expect to move into a deficit again in October. This is due to a wider-than-expected trade deficit in October, which will likely move the current account into deficit in Q4–which would be the first time since Q1 2012.”

FocusEconomics panelists see merchandise exports contracting by 0.8% and imports by 6.2% in 2023, bringing the trade surplus to USD 9.6 billion. In 2024, exports are expected to increase by 1.1% and imports by 1.3%, ending up with a trade surplus of USD 8.6 billion.