Korea produced a trade surplus for the eighth consecutive month in September, with exports surpassing imports by as much as $3.15 billion. That was not a small feat.
Economic policymakers were pleased with the news as they should, but not too much. Their joy was tinged with as much concern, as exports declined for the third consecutive month.
Exports fell 1.8 percent year-on-year to $45.66 billion last month. Imports dropped more sharply, 6.1 percent, to $42.51 billion. With both exports and imports declining, economic policymakers dubbed the monthly trade surplus as a “slump type.”
Of course, the culprit was a weakening demand in the world. Korean shipments dropped, as the economic crisis of European origin continued to deepen throughout the world.
To fight the slump, the central banks in the United States, the European Union and Japan have recently been pumping liquidity into the market in the name of “quantitative easing.”
The measures have yet to produce the intended effect of stimulating the national economies. When they do, they will probably have a limited effect of boosting imports from Korea.
The reason is that the Korean currency, which has recently been gaining strength, will probably remain strong throughout the remainder of the year. Another damper is the protectionism, which is rearing its ugly head. Moreover, leading Korean exporters, such as Samsung Electronics and Hyundai Motor, are targeted by their global rivals for litigation against their allegedly unfair trade practices.
It’s no wonder the nation’s export outlook is being revised downward. Hyundai Research Institute, for instance, has recently slashed its forecast of growth in exports for this year to a mere 1.7 percent, well below the administration’s year-end target of 7.4 percent.
The anticipated decline will have a severe impact on the Korean economy, as value added by exports will fall by 17.1 trillion won and the number of jobs provided by them will fall by 281,000, according to the estimates by the private think tank.
The administration will have to do all it can in the short term to prop up weakening exports and to prevent the economy from suddenly cooling. It needs to make greater financing available to exporters and assist them in overcoming rising protectionism and exploring new markets.
To make up for slow growth in exports, the administrations will also have to push for deregulation and research and development, and foster the service industry in the longer term.
