South Korean exports plunged in August for a tenth consecutive month, dimming optimism surrounding a flurry of data that suggested Asia’s fourth-biggest economy might have sailed clear of an economic storm.
The country is the first major exporter to post trade data for August. Hopes of Seoul leading the Asian recovery had been growing after leading companies such as Samsung Electronics and Hyundai Motor posted strong profits in the second quarter. Earlier this week, South Korea reported a 2 rise in industrial output in July from the previous month, beating economists’ forecasts.
In spite of these encouraging signs, the vital export sector is still struggling. August shipments slumped 20.6 per cent compared a year ago to $29bn. Shipments were also down more than 9 per cent from July, according to the Ministry of Knowledge Economy.
The ministry attributed the fall to declining deliveries of ships from Korea, home to three of the world’s biggest dockyards. Vessel exports slipped to $2.6bn from an average of $4bn between January and July. The ministry also blamed reduced working days during the summer and industrial action at carmakers such as Kia and Ssangyong.
Demand for semiconductors, the country’s most valuable export, slowed its rate of decline in another encouraging sign for Samsung, the country’s top exporter.
Lagging a month behind, India and Indonesia on Tuesday reported their exports expanded in July from June, with India’s up 6.3 per cent to $13.6bn and Indonesia’s up 3.4 per cent to $9.7bn.
South Korea’s exports had been given a boost by its weak currency late last year but the won has since recouped much of its value, gaining 20 per cent against the dollar since March. Economists said currency factors played a negligible role in the headline export figures compared with declining ship deliveries.
The continued fragility of the exports sector has vindicated South Korean government ministers who have frequently warned that it is too early talk of an “exit strategy” from crisis measures.
Ministers in Seoul have said in recent weeks that government pump-priming took the lead in reviving growth over the first half of 2009, but cautioned the economy could run out of steam in the third quarter because the budget was front-loaded.
Although leading conglomerates, such as Samsung, Hyundai and LG, are in robust health, the picture from smaller companies, responsible for 90 per cent of the country’s employment, is far more patchy. The government has rolled over loans for smaller companies and set up a bank recapitalisation fund to encourage lending to them.
Steeling itself for job losses in traditional manufacturing sectors, the government is pushing ahead with construction and manual labour schemes reminiscent of the US “new deal” in the 1930s, expected to create hundreds of thousands of jobs.