South Korea’s exports rose 5.2% in December compared to a year earlier, rebounding for a third consecutive month after over a year of declines. However, exports for the full year 2023 fell 7.4% amid a global economic slowdown. While the December data provides some positive signs, South Korea faces a challenging export environment in 2023.
Key Details from December Export Data
According to data from the Ministry of Trade, Industry and Energy, South Korea’s outbound shipments came to $46.27 billion in December, up from $44 billion a year earlier. This marks the first month of export growth since September 2021.
Several key details stand out:
- Exports to China fell 10.9% year-on-year to $10.12 billion as demand slowed. For the full year, exports to China dropped 14.1%.
- Shipments to the United States jumped 23.7% on-year to $5.44 billion thanks to strong semiconductor sales. As a result, the US overtook China as South Korea’s largest export destination for the first time since 2003.
- Semiconductor exports grew 7.1% driven by memory chips. Petrochemical shipments also rose 12.4%.
- By product, exports of telecom devices and computers surged 29.4% and 21% respectively. But vehicle exports slid 13.4% due to supply chain issues.
“The rebound in tech exports comes as a relief after over a year of declines,” said Trade Minister Lee Jong-seong. “But we aren’t out of the woods yet in terms of global economic weakness.”
| Destination | Dec 2022 Exports | Change YOY |
|---|---|---|
| Total | $46.27 billion | +5.2% |
| China | $10.12 billion | -10.9% |
| United States | $5.44 billion | +23.7% |
Background – Export Slump in 2022
South Korea relies heavily on exports with overseas shipments accounting for over 40% of its GDP. But 2022 proved to be the worst year for exports since 2009.
Prior to December, exports had declined year-over-year for 13 consecutive months. This Export in October fell 5.7% led by a 30% plunge in semiconductor shipments as global tech demand evaporated.
Several factors contributed to the dismal export environment:
- The war in Ukraine and soaring energy costs pushed much of the world into an inflation crisis, badly hurting consumer spending
- Global supply chain problems stemming from China’s zero-COVID policies restricted production
- The rising interest rate environment especially in the US sharply slowed demand for things like memory chips
“It was a remarkably difficult year for Korean exporters,” said Park Chul-ho, Director of the Korea International Trade Association. “Deteriorating economic conditions around the world squeezed our overseas sales.”
As exports languished, South Korea’s GDP growth is estimated to fall to just 2.0% in 2022 down from 4.0% in 2021. Meanwhile, the Korean won currency declined over 10% against the US dollar.
Outlook for 2023: Gradual Recovery But Much Uncertainty
The return to export growth in December has kindled some cautious optimism for 2023 among Korean officials and businesses. The global economy is projected to slow further but avoid a severe downturn, which could stabilize demand.
If the recovery in the final months of 2022 proves durable, exports could return to modest growth as the year progresses. The Ministry of Economy and Finance forecasts full-year export growth of 1.7% in 2023.
Yet multiple risks cloud the outlook. Most analysts warn the global economy could still tip into recession later this year if inflation persists or China’s reopening leads to new COVID flare-ups. A worldwide downturn would quickly snuff out Korea’s export rebound.
Additionally, the ongoing slump in semiconductors which represent over 15% of Korean exports remains a concern. Memory chip prices continue falling sharply as inventories pile up, and demand is not expected to recover substantially until late 2023 or 2024.
“I worry the December numbers are a head fake and mask festering weakness in global tech and autos,” said Deutsche Bank economist Koh Dong-hwan.
To boost competitiveness, the new administration of President Yoon Suk-yeol has pledged to ease regulations and provide tax incentives for exporting industries over the next year. But government policy may have limited impact on external economic forces.
For now, Korean businesses must brace for what could be another rollercoaster year of unpredictable overseas sales with the global economy sitting on a knife’s edge. Navigating persistent market uncertainty will test the resilience of South Korea’s vaunted exporting prowess.
To err is human, but AI does it too. Whilst factual data is used in the production of these articles, the content is written entirely by AI. Double check any facts you intend to rely on with another source.
