Korea seems to have been hit more seriously than other countries by the global economic downturn as its exports are contracting steeply. With the outlook still negative due to external uncertainties, economists estimate that exports, once a sustaining pillar of the economy, will eat into economic growth this year.
According to OECD data, Korea’s exports have been contracting since January last year when they marked a 0.9 percent decrease. That figure, however, was the fourth best among 31 OECD countries where data was available, as most countries saw exports decrease. Only Japan, Ireland and Mexico saw their exports increase.
However, Korea has seen its exports dip steeper than most other countries. Exports contracted 10.6 percent in May last year, and dipped 15 percent in August, making the country rank 19th in terms of exports. Korea has since slid to 28th as its exports dipped 18.9 percent in January and 12.7 percent in February.
“Domestic consumption will contribute to most of the economic growth this year while exports will continue to be negative,” the National Assembly Budget Office forecast in a report. It estimated that contracting exports will pull down the GDP growth rate by 0.2 percentage points. Exports are likely to fall 5.6 percent this year while imports will drop further by 7.4 percent, according to the budget office.
Last year, exports pulled down economic growth by 1 percentage point as exports dropped 8 percent. As a result, economic growth stood at 2.6 percent, propped up by domestic consumption. “Due to a slowdown in the global economy and trade, coupled with falling oil prices and excessive supply, exports are expected to contract this year as well,” the budget offi ce said.
The government is turning somewhat optimistic about exports, pointing out that the decrease is slowing its pace. “As the quantity of exports is increasing, we expect that a recovery of prices will lead to an improvement in the latt er half of the year,” said Cheong Seung-il, deputy trade minister.
Experts, however, are pessimistic about seeing a notable rebound amid contracting global trade. “It will take some considerable time until exports make a notable increase,” said Ju Won, an economist at Hyundai Research Institute, pointing out that there are both structural problems and short-term factors behind the falling exports.
“It is impossible to pull up exports without the Chinese market. The government should focus on enhancing use of the Korea-China FTA as well as strengthening diplomatic efforts toward the Chinese government and advancing into high-growth regions within China.”
The government is planning to include diverse measures to pull up exports in economic policy directives for the latter half of the year which will be announced around the end of this month. Ju said the government should be fl exible in economic policies. “To prepare for the worst-case scenario of contracting exports, it needs more aggressive monetary and fiscal policies,” he said. “It should stop exports from negatively aff ecting domestic consumption as well.”
< Source: KITA>
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