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Korea Trade January 2023

Korea: Merchandise exports drop in January

Merchandise exports dived 16.6% year on year in January (December: -9.6% year on year). January’s figure marked the largest drop since May 2020. Meanwhile, merchandise imports declined 2.4% in annual terms in January (December: -2.5% yoy).

As a result, the merchandise trade balance deteriorated from the previous month, recording a USD 12.7 billion deficit in January (December 2022: USD 4.7 billion deficit; January 2022: USD 4.9 billion deficit). Lastly, the trend pointed down, with the 12-month trailing merchandise trade balance recording a USD 55.0 billion deficit in January, compared to the USD 47.3 billion deficit in December.

Semiconductor exports fell nearly 45%, driving the decline in January, hit in value by lower prices and in volume by a drop in exports to China. Meanwhile, vehicle exports rose almost 22%, likely benefitting from the recent easing of supply bottlenecks.

Analysts at Nomura commented:

“We expect export growth to remain weak despite China’s reopening, as we believe the trade linkage with China has weakened and Korea’s exports have become more interlinked with DM economies since 2019. Indeed, the combined share of exports to the US and EU in total exports has increased to ~30% recently from the mid-20% range before 2019, outpacing the share of exports to China since 2019.”

ING’s Min Joo Kang said:

“Memory prices have fallen more than 50% since their 2022 peak, and further unfavourable price effects look likely to weigh on Korean exports for a while longer. The market will eventually improve on the back of China’s reopening and a recovery in mobile phone demand, but Korean chipmakers will face another geopolitical challenge from tightening US sanctions against tech exports to China. Thus, we expect the positive spill-over from the reopening of China to the Korean economy to be limited.”

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