South Korea sees surge in exports, boosting economic outlook

Early trade data from South Korea has revealed a strong expansion in exports, indicating a potential acceleration in economic growth for the country, Bloomberg News reported on Tuesday.

According to figures released by the customs office, exports surged by 17.7 per cent in the first 20 days of May compared to last year.

This positive momentum comes with the backdrop of recovering global demand and positive export sectors, particularly in semiconductor production.

The strong export performance is expected to contribute to an upward revision of South Korea's annual economic growth forecast.

Following a better-than-expected 1.3 per cent expansion in the first quarter, analysts anticipate the Bank of Korea to raise its growth projection from the current 2.1 per cent.

This adjustment reflects the resilience of South Korea's export-driven economy and underscores the role of exports in driving overall economic recovery.

Semiconductor exports, a key driver of South Korea's economy, experienced a notable increase of 45.5 per cent in the first 20 days of May compared to last year.

Demand for semiconductors has been particularly strong, driven by orders from smartphone manufacturers, data centre operators, and artificial intelligence developers.

However, not all sectors saw growth, with declines observed in car sales and wireless communications device exports.

While exports to the United States and China registered modest gains, shipments to the European Union declined.

This mixed performance in export destinations highlightsthe importance of diversifying markets to mitigate risks associated with overreliance on specific regions.

Analysts predict a widening of the trade surplus for May, reflecting sustained export momentum.

Despite the positive outlook, downside risks persist for South Korea's economic growth.

Concerns linger over credit issues, particularly in the real estate sector, as well as uncertainties surrounding China's economic recovery.

Additionally, the fluctuating exchange rate poses challenges for South Korean exporters, impacting their earnings and increasing debt burdens.

Lim Dong-min, an independent economist and columnist, highlighted the dual nature of the exchange rate dynamics.

"It’s both good and bad for exporters, but overall it adds to uncertainties," Bloomberg quoted him as saying.

South Korean firms, deeply integrated into global supply chains, remain vulnerable to external shocks, underlining the need for proactive risk management strategies.

(With inputs from Bloomberg)