|South Korea’s Exports Decline 17.4% in December (Update2)|
By William Sim
Jan. 2 (Bloomberg) -- South Korea’s exports fell by more than 15 percent for a second straight month in December, adding to signs the economy is headed for its first recession since 1998.
Overseas shipments dropped 17.4 percent from a year earlier after tumbling 19 percent in November, which was the biggest decline since 2001, the Ministry of Knowledge Economy said today. The median estimate of nine economists surveyed by Bloomberg News was for a 16 percent drop.
Asia’s export-driven economies are slowing as demand for their products diminishes amid recessions in the U.S., Japan and Europe plus weakening growth in China. President Lee Myung Bak said today South Korea will run an “economy-emergency government” this year to fight the worst economic crisis since its 1997 $57 billion bailout by the International Monetary Fund.
“The economy is cooling much faster than expected as the global economic downturn takes a bigger toll on our exports,” said Chun Chong Woo, an economist at Standard Chartered First Bank Korea Ltd. in Seoul. “The government and the central bank will have to take more and stronger action to save the economy.”
Exports are expected to rise 1 percent and imports will likely fall 4.7 percent this year from 2008, resulting in a trade surplus of $11.9 billion, the ministry said. The government will “make its best efforts” to achieve its target of boosting exports by 6.5 percent in 2009, it said.
Policy makers are pumping funds into South Korea’s financial system, boosting public spending, cutting taxes and slashing interest rates to cushion the economy from fallout from the global financial crisis. The Korean won fell 26 percent and the Kospi stock index dropped 41 percent in 2008.
The Korean won, the region’s worst performing currency last year, dropped 5.2 percent to 1,324.5 per dollar at 10:48 a.m. in Seoul. The Kospi stock index lost 0.4 percent to 1120.14.
South Korea’s economy is cooling fast as the deepening global recession takes a toll on demand at home and abroad. Factory output fell by the most on record in November and confidence among manufacturers tumbled to a record low. The jobless rate climbed to 3.3 percent in November, the highest since July 2007.
Exports rose 13.7 percent and imports surged 22 percent in 2008 from a year earlier, posting an annual trade shortfall of $13 billion. The nation has a trade surplus of $667 million in December as imports plunged 21.5 percent because of declining oil prices.
South Korea’s consumer prices rose 4.1 percent in December from a year earlier, the smallest increase in eight months, giving the central bank room to cut interest rates next week to revive the economy.
The Bank of Korea will focus its rate policy on reviving the flagging economy and stabilizing financial markets this year, Governor Lee Seong Tae said this week. The bank cut its key rate by 100 basis points to a record low of 3 percent on Dec. 11, extending the most aggressive round of easing since it began setting the policy rate in 1999.
Hyundai Motor Co., Hynix Semiconductor Inc. and LG Display Co., South Korea’s largest exporters, have joined global rivals in cutting output amid sagging demand.
Hyundai Motor’s sales in the U.S., its biggest overseas market, dropped 40 percent in November. South Korea’s largest automaker said this month it will reduce factory operations and freeze wages for administration staff.
Hynix Semiconductor, the world’s second-biggest maker of memory chips, said this month it will eliminate 30 percent of its executives and cut labor costs by more than 15 percent.
LG Display, the world’s second-largest maker of liquid- crystal displays, this month lowered its profit forecast for the fourth quarter, citing a bigger-than-expected decline in panel prices amid the global recession.
To contact the reporter on this story: William Sim in Seoul at firstname.lastname@example.org.
Last Updated: January 1, 2009 21:00 EST