70.3 % of Korea’s Exporters Suffer from Competitiveness Crisis, 30.3% Experience Volume Decrease

According to a survey on the impact of recent trends of weak yen and euro on Korean exporters, many responded that it was impossible to maintain the export competitiveness under the current exchange rate.

The Institute for International Trade of the Korea International Trade Association (President, Kim Geuksoo, http://iit.kita.net) released a report titled “The Impact of Recent Trends of Weak Yen and Euro on Korean Exporters” (307 companies participated, 2015. 5.11~5.20.) According to the report, 70.3 percent of the respondents said that they would not be able to maintain their competitiveness against Japanese products under the current won/yen (100 yen is approximately 900 won) exchange rate.

By industry, more number of companies in steel and metals (74.4%) and machinery (72.9%) industries, which are relatively competitive against those of Japan, responded that it would be difficult for them to retain their competitiveness. In addition, under the current won/yen exchange rate, while 54.1 percent of respondents are estimated to face the worsened profitability, 30.3 percent of participants said that their export volume has been declined.

Therefore, if the current won/yen exchange rate continues until the end of this year, 57.7 percent of the entire respondents said that their export volume of this year would be “reduced” against their original target and 18.6 percent of the participants answered that their exports would be a shortfall of more than ten percent against the targeted amount.

Moreover, it is expected that Korean exporters’ price competitiveness will continue to weaken as 43.3 percent of the respondents said that their Japanese rivals “have recently reduced their export unit value” owing to the weak yen.

Meanwhile, with regard to the weak euro, 51.8 percent of participants said it would be difficult for them to maintain their competitiveness when exporting to EU at the current exchange rate level (approximately 1,230 won against 1 euro). By industry, more respondents in textile (58.6%), machinery (57.1%), metal goods (54.1%), etc. demonstrated more concerns regarding the matter.

In addition, under the recent won/euro exchange rate, 54.4 percent of the respondents are facing the worsening profitability and 22.8 percent of participants said that their export volume has been declined. Consequently, if the current exchange rate continues until the end of this year, 34.2 percent of the participants anticipated potential disruptions to exports to EU, more than 5 percent against the original target. The participants in textile (41.3%) and chemical (36.0%) industries were more worried about the export disruptions.

Oh Se-hwan, senior researcher at KITA, said “In order to be prepared for the excessive exchange rate volatility, it is necessary for the policymakers to make efforts to stabilize the currency rate as well as to participate in international policy coordination.” He stressed “It is also required for the Korean exporters to exert active efforts, such as strengthening exchange risk management, saving costs, etc., to stand on their own.”