(Bloomberg) -- South Korea’s exports fell in April by the most since the global financial crisis, offering an early sign of how the coronavirus pandemic is slamming world trade.
The value of overseas shipments dropped 24% from a year earlier, the trade ministry said Friday, led by sharp falls in exports of ship, cars and auto parts, semiconductors and oil products. The fall was the biggest since May 2009 and contributed to the first trade deficit since January 2012.
South Korea’s export numbers, one of the first full-month data sets on trade, paint a grim picture of world commerce amid widespread lockdowns. The figures also point to the limitations of extra spending and virus containment efforts by President Moon Jae-in’s administration to shield the economy from the pandemic’s global hit.
Rising unemployment and corporate bankruptcies in major economies are likely to further weigh on global demand in the coming quarters, leaving South Korea’s automobile and electronics sectors vulnerable, said DBS Bank economist Tieying Ma. DBS sees Korea’s exports continuing to fall at a double-digit pace through the second and third quarters.
The data showed shipments to China, the U.S. and other major trading partners falling across the board, with auto part, ship and oil product exports dropping by half or more.
South Korea Approves 12.2Tln Won Extra Budget to Fund Handouts
The figures come a day after Korea’s parliament passed a second extra budget worth around $10 billion that offers cash handouts to all households. South Korea is already planning a third supplementary budget to fund what President Moon calls a “Korean-style New Deal” to create jobs and boost growth once the virus is brought under control.
The government has tried to help exporters by helping with financing and credit measures, but it can’t fully offset the external shock to the economy, said Angela Hsieh, economist at Barclays Bank PLC.
“That’s why I think focusing on domestic demand to help households and to support the job market will be more direct and effective for the government at this stage,” she said. It also remains unclear whether the latest export data reflects a supply-side distortion resulting from lockdowns or a wider-reaching destruction of demand, she added.
What Bloomberg’s Economist Says
“We’re downgrading our forecasts for South Korea’s economy as the global coronavirus pandemic -- and the aggressive measures to contain it -- craters external demand.”
--Justin Jimenez, economist
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Exports of ships dropped 60.9%, oil products by 56.8%, car parts by 49.6% and semiconductors by 14.9%.Imports slid 15.9% from a year earlier, compared with a 14% drop forecast by economists.The trade balance swung to a deficit of $946 million.
(Adds economist comments and more detail)
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