Korea: Merchandise exports grow at a softer pace in September
Merchandise exports climbed 2.8% year-on-year in September, on the heels of August’s 6.6% rise. The figure marked the slowest growth since October 2020. Meanwhile, merchandise imports climbed 18.6% in annual terms in September (August: +28.2% yoy), marking the weakest result since April 2022.
As a result, the merchandise trade balance improved from the previous month, recording a USD 3.8 billion deficit in September, the narrowest since June (August 2022: USD 9.5 billion deficit; September 2021: USD 4.3 billion surplus). Lastly, the trend pointed down, with the 12-month trailing merchandise trade balance recording a USD 24.1 billion deficit in September, compared to the USD 16.1 billion deficit in August.
The trade deficit narrowed as the dampening effect of lower commodity prices on import growth offset the hindering effect of weaker external demand on export growth.
ING’s Min Joo Kang commented on the trade outlook:
“Most of Korea’s exports are intermediate goods processing trade. Therefore, if global external demand weakens, imports of raw materials and components will decrease. In addition, imports tend to weaken more quickly when domestic demand is weak, which is our base case scenario over the coming quarters, which could eventually lead to a trade surplus. We think that the current trade deficit trend will continue until early next year, but after that, as both external and internal demand weakens, the trade balance is expected to turn to a surplus again.”