Korea: Merchandise exports gain steam in May
Merchandise exports soared 45.6% year-on-year in May (April: +41.2% yoy). May’s reading marked the sturdiest outturn on record. Notwithstanding a favorable base effect, May’s result was still strong, and was comfortably above May 2019’s pre-pandemic levels. In detail, auto exports gained steam, nearly doubling from last year. Moreover, shipments abroad of semiconductors also expanded markedly. However, ship sales—the third biggest export group—slid. Meanwhile, merchandise imports jumped 37.9% on an annual basis in May (April: +33.9% yoy), marking the best result since May 2010.
As a result, the merchandise trade balance improved from the previous month, recording a USD 2.9 billion surplus in May (April 2021: USD 0.4 billion surplus; May 2020: USD 0.2 billion surplus). Lastly, the trend improved, with the 12-month trailing merchandise trade balance recording a USD 51.4 billion surplus in May, compared to the USD 48.6 billion surplus in April.
Looking ahead, exports should remain robust, benefiting from sustained recoveries abroad, massive stimulus in major trading partners, and the ongoing surge in global demand for two of South Korea’s key exports: IT products and electric vehicles.
That said, Jeong Woo Park, economist at Nomura, highlighted limitations to further growth:
“Capital investment has been weak, with most industry preferring to replace old equipment over investing in new equipment and facilities that can increase capacity. […] Overall, while aggregate exports are likely to remain around current levels, we believe that old capacity limits are likely to remain in place and thus Korea’s exports value will likely level off, suggesting slower sequential growth and a diminishing influence of exports on the economic recovery in coming months.”