South Korea posts the worst trade deficit in its history

[beijingwalker]

South Korea posts the worst trade deficit in its history​

PUBLISHED TUE, JAN 31 202310:01 PM EST
Jihye Lee@THEJIHYELEE

KEY POINTS

• South Korea recorded a trade deficit of $47.5 billion for 2022, the worst trade deficit since the customs agency started compiling data in 1956.
• January exports fell $46.3 billion, or 16.6% – while imports fell $59 billion, or 2.6%.

South Korea recorded a trade deficit of $47.5 billion for 2022, official data from the customs agency showed.
It marked the worst trade deficit since the agency started compiling data in 1956 and far more than the $20.6 billion trade deficit in 1996.

January exports fell $46.3 billion, or 16.6% – declining more than expectations for a drop of 11.3%. Imports fell $59 billion, or 2.6%, falling less than forecasts of a 3.6% decline.

That resulted in a deficit of $12.7 billion for January, more than the $9.27 billion expected by economists polled by Reuters.

The Korean won traded at 1,232.24 against the U.S. dollar following the report.

“There’s some expectation that the world economy won’t be facing as difficult of a situation as expected thanks to China’s reopening and unexpected growth from surrounding economies,” South Korea’s minister of economy and finance Choo Kyung-ho said in a meeting with officials on Wednesday.

“The widening trade deficit seen in January is widely seen to be due to seasonal factors such as an import in energy exports for the winter, as well as a sudden drop in chip prices, leading to a worsened picture,” Choo said.

This comes as global smartphone shipments dropped 18% to 296.9 million units in the final quarter of 2022 as demand fell, according to Canalys.

“Despite showing some stabilization in Q3, Asia Pacific and Europe suffered their worst Q4 performances in history in 2022,” said Canalys analyst Sanyam Chaurasia, adding shipments in Asia-Pacific fell by 8% in 2022 despite resilience throughout the year.

On Tuesday, chipmaker Samsung Electronics reported its worst quarterly profit in eight years, while SK Hynix also posted a record loss for the period.

South Korea posts the worst trade deficit in its history

South Korea saw the worst trade deficit since the agency started compiling data in 1956 and more than the $20.6 billion trade deficit seen in 1996.

www.cnbc.com

 

[beijingwalker]

South Korea: trade deficit hit record in January​

1 February 2023

Exports fell for a fourth straight month in January due to weak global demand for semiconductors and petrochemicals, with little hope for a meaningful improvement in Korea's trade performance in the first half of this year. Today's data supports our view that 1Q23 GDP will deliver a second consecutive quarter of contraction

Exports fell 16.6% YoY in January​

Looking at the details of the export data just released, weak performances were even more broadly based and semiconductor exports deteriorated even further compared with the previous month. Among major export items, displays (-36%), steel (-25.9%), and petrochemicals (-25.0%) all declined while semiconductor exports fell the most (-44.5% vs -27.8% in December).

On the other hand, vessels (86.3%), automobiles (21.9%) and batteries (9.9%) all rose in January. We believe that automobiles and E-vehicle-related exports continue to outperform, but the momentum will slow in the coming months as the US and Europe's demand will soften. By export destination, exports to China dropped the most, falling 31.4%YoY, while exports to the ASEAN region (-19.8%) and the US (-6.1%) also slid.

Trade deficit hit record high in January​

The semiconductor downcycle will last at least another six months​

According to various industry reports, several major memory chipmakers including Hynix have cut their capex spending compared to last year and will focus on inventory management. But market leader, Samsung Electronics, announced that it will maintain its capital expenditure at the same pace as last year. This means that the large imbalance between supply and demand is unlikely to be corrected anytime soon and sector-wide inventory levels will continue to rise, resulting in further declines in unit memory chip prices. Memory prices have fallen more than 50% since their 2022 peak, and further unfavourable price effects look likely to weigh on Korean exports for a while longer. The market will eventually improve on the back of China's reopening and a recovery in mobile phone demand, but Korean chipmakers will face another geopolitical challenge from tightening US sanctions against tech exports to China. Thus, we expect the positive spill-over from the reopening of China to the Korean economy to be limited.

Growth outlook and BoK Watch​

Sluggish exports were one of the main reasons for the GDP contraction last quarter and we expect this to continue for several more months. Yesterday's industrial production data also suggest that domestic demand growth will remain sluggish in the current quarter. The manufacturing PMI edged up to 48.5 in January from 48.2 in December, but still remained below the neutral level. Thus we maintain our view that 1Q23 GDP will contract by 0.2% QoQ (seasonally adjusted rate). As external and domestic growth conditions worsen and utility prices rise, the main opposition party has urged the government to draw up a supplementary budget. However, we believe that the likelihood of this is still low at the moment. The government will expand energy subsidy programs for low-income households and ask local governments to refrain from raising public utility charges as much as possible. Meanwhile, the Bank of Korea will pause its tightening policy from February although it will maintain its hawkish stance for the time being.

South Korea: trade deficit hit record in January

Exports fell for a fourth straight month in January due to weak global demand for semiconductors and petrochemicals, with little hope for a meaningful…

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