Tuesday, April 1, 2008

South Korea Exports and Trade Deficit March 2008

South Korea's exports accelerated sharply in March on the back of rising shipments of oil products, cars and mobile phones to Asia and Latin America. Overseas shipments rose 19.1 percent from a year earlier, quickening from February's 18.8 percent gain, the economics ministry said in Gwacheon today.

Increased shipments to China and emerging markets have helped exporters to withstand faltering sales to the U.S., where the economy may be in a recession. Still, South Korean factory output fell in February and manufacturers' confidence for April deteriorated, reports showed yesterday, signaling companies expect demand may slow.

Commenting on the general situation in South East Asia, Vikram Nehru, the World Bank’s chief economist for east Asia and the Pacific (ie not including Japan and Australia), said on Tuesday the shift in export orientation was taking place faster than expected. “I didn’t expect such a rapid shift towards non-US markets as we are seeing,” he told the Financial Times yesterday "That is a sign of very adept marketing, as exchange rates and incentives change."

While annual export growth from emerging east Asian nations initially slowed from 22 per cent in January of last year to 15-16 per cent in the third quarter, it has since rebounded to 18-19 per cent.

The World Bank also said more sophisticated domestic production was allowing China to source more of its input needs internally.

“If this trend continues and if other east Asian economies are able to exploit these new opportunities in China’s domestic market then, over time, China is also likely to become an increasingly independent growth pole for the rest of east Asia,’’ the bank said.

Exports advanced to $36.2 billion in March and imports gained 25.9 percent to $36.9 billion, today's report showed. But Korea also posted a trade deficit of $668 million, the fourth consecutive shortfall. However, the March deficit was smaller than that in the first two months of 2008 as soaring oil prices reduced oil imports to 72 million barrels per day, down 10.8 percent from February. South Korea had previously enjoyed a monthly trade surplus for a number of years before starting to generate a deficit in December 2007.

Exports to China climbed 31.5 percent and sales to the European Union gained 21.4 percent in the 20-day period, outpacing a 10 percent increase in shipments to the U.S. China is South Korea's largest overseas market, buying 22 percent of exports. Manufacturing activity in China, the world's fastest-growing major economy, accelerated in March, a survey of purchasing managers showed recently.

South Korea's exports to central America and South America surged 49.6 percent in the first 20 days of last month from a year earlier, today's report showed. Shipments of oil products jumped 83.4 percent in the first 20 days of March and exports of mobile phones gained 48 percent. Exports of cars rose 28.5 percent in the 20-day period.

The Kospi index has dropped 10 percent and the won has fallen 5.8 percent this year on growing concern fallout from the U.S. housing recession and global credit-market slump will cool economic growth in coming quarters.

The 2008 trade surplus is likely to ``miss'' the government's target of $13 billion because of rising oil prices, Oh Jung Kyu, director general for trade and investment at the ministry told reporters in Gwacheon today. Import costs have increased as the price of Dubai crude oil, an Asian benchmark, surged 70 percent since the start of 2007. South Korea buys 97 percent of the fuel it needs from overseas.

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