Korea: Underlying merchandise exports remain solid in April
In April, merchandise exports fell 1.5% compared to the same month last year, totaling USD 50.1 billion. This represented a contrast to the 6.1% increase in March and the worst export performance in 18 months. Delving into the details, however, the result in April was heavily weighed on by a base effect from the same month last year when exports of ships increased sharply. Excluding ships, exports would have risen by over 10% in April this year on the back of surging external sales of Korean-made semiconductors, petrochemicals, petroleum products and general machinery. Meanwhile, merchandise imports grew 14.5% year-on-year in April (March: 5.0% year-on-year) as the value of crude oil and liquefied natural gas shipments to Korea increased.
The merchandise trade surplus narrowed in April to USD 6.6 billion from USD 6.8 billion in March and USD 12.9 billion in the same month last year. The 12-month trailing trade surplus amounted to USD 87.3 in April (March: USD 93.7 billion).
There is reason to be optimistic about the external sector for the rest of this year. For example, there are indications that trade relations between China and Korea, which have suffered since Korea installed a U.S. antimissile system early last year, are improving. On 30 March, for example, Chinese State Councilor Yang Jiechi had a positive meeting with Korean President Moon Jae-in, during which he said that there would be “tangible results in the future”. Moreover, data later released by the Korea Tourism Organization showed that, in March, tourist arrivals from China crossed the 400,000 mark for the first time in 12 months. A healthy global economy should also support demand for key Korean merchandise exports, particularly semiconductors.
There are potential obstacles to the external sector’s success, however, including more restrictive trade policies abroad, particularly from the United States. Although Korea and the U.S. agreed in principle to a revised free trade agreement on 26 March, Korea’s external sector could nevertheless be hit by growing trade tensions between the U.S. and China.