South Korea’s Export Growth Continues, Supporting Economy

(Bloomberg) -- South Korea’s exports continued to grow last month, supporting confidence among policymakers that the economy will see a solid first quarter on the back of rising global demand for semiconductors and technology devices.

Average daily shipments increased 9.9% from a year earlier, according to data released Monday by the trade ministry. Without adjustment for the number of working days, headline exports rose 3.1% while overall imports decreased by 12.3%. The trade surplus came to $4.3 billion.

South Korea is among the world’s largest exporters of goods and serves as a bellwether for global commerce. Its dominance in memory chips and smarthphones also makes the nation a barometer for tech demand. The latest figures point to continued recovery in global demand especially in the chip sector.

South Korean exports of chips increased 35.7% from a year earlier in March to $11.7 billion, the largest monthly sales total since March 2022, the ministry said. Display exports rose 16.2% and computer sales increased 24.5%, too, underscoring the momentum that stems from technology demand.

Semiconductor sales have been brisk in recent months, allowing overall exports to rebound. The growth momentum in exports that has carried into this year is one reason authorities expect the South Korean economy to expand faster in 2024 than last year. 

Still, the chip recovery will need to be accompanied by a stronger pickup in exports of other products such as automobiles, steel and oil chemicals for authorities to be more certain that the economy will grow more than 2% as they estimate.

Shipments of automobiles fell 5% and those of machinery decreased 10% from a year earlier in March, according to the ministry. Oil products rose 3.1%.

The Goods Trade Barometer managed by the World Trade Organization reached 100.6 last month, slightly above the trend baseline, indicating weak upward momentum in global trade. 

“Merchandise trade should continue to recover gradually in the early months of 2024, but any gains could be easily derailed by regional conflicts and geopolitical tensions,” the global organization said last month.

As a nation that has China as its biggest trading partner and the US as its top security ally, South Korea is among the nations most vulnerable to geopolitical clashes that can weigh on international trade momentum. While US consumer sentiment and spending have remained strong, demand from China has been underwhelming as the world’s second-largest economy struggles to emerge from its property slump.

Adding to risks this year is a series of elections scheduled across a wide swathe of the world that could result in protectionist policies that damage trade-reliant economies like South Korea’s. 

The country itself will hold parliamentary elections later this month, in a vote that could influence the degree to which it re-calibrates its relationship with China in the long run.

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