World Economy

S. Korea Exports Slump Biggest in Six Years

S. Korea Exports Slump Biggest in Six YearsS. Korea Exports Slump Biggest in Six Years

South Korean exports in January suffered their biggest slump in more than six years as sales to the key China market collapsed, pointing to another wrenching year for Asia’s export-reliant economies and more stimulus from regional policymakers.

South Korea is the world’s sixth-largest exporter and the first major exporting economy in the world to report trade figures every month, providing anxious financial markets a quick health check on global trade and the economy, Reuters reported.

The numbers showed global demand remained depressed, with Korean exports in January down a worse-than-expected 18.5% from a year earlier, according to trade ministry data on Monday. It was the biggest annual contraction since August 2009 and the 13th straight month of declines.

Shipments to China, South Korea’s largest market, tumbled 21.5% on-year in January in their biggest drop since May 2009, and the trade ministry said export conditions are worsening.

“Shipments being this weak means a recovery in consumption is urgently needed. If you look at the economy as a whole, this might boost the need for policy easing,” said Lee Sang-jae, chief economist at Eugene Investment & Securities.

Although few expect the Bank of Korea to cut the base rate from its record-low 1.50% at the Feb. 16 meeting, the pressure is growing for more stimulus.

   Gloomy Start

Other trade-reliant Asian economies have also seen a gloomy start to the year, with factory surveys in China showing a further contraction in export orders in January and Taiwan’s export orders in December shrinking at the fastest pace since early 2013.

Treasury bond futures jumped 0.13 points to 110.05, indicating growing pressure for more interest rate cuts in South Korea over coming months.

Following the data release, Finance Minister Yoo Il-ho said the government will announce measures soon to boost exports and consumption. He did not give a timeframe.

Slowing economic growth in China and weaker emerging market currencies are undercutting sales of electronics ranging from televisions to personal computers, spelling trouble for companies such as Samsung Electronics, SK Hynix and LG Display.

The trade ministry said export products like smartphones, cars, semiconductors and flat-screen displays had all notched falls in January, a discouraging sign for bellwether companies traditionally propping up the economy.

The data also showed imports slid 20.1% on-year, compared to a 19.2% fall in December. The resulting $5.3 billion trade surplus was the smallest surplus since Nov. 2014.

   Rate Cut Urged

The Bank of Korea is being pressured to cut its key interest rate as Japan lowered its rate last week and the European Central Bank is pushing for more aggressive monetary easing, analysts said Monday.

IBK Securities analyst Kim Ji-na expects the BOK to cut its rate in March to help exporters compete with their Japanese rivals that now enjoy a weak currency.

“Korea has no option but to adopt a low currency policy to boost its exporters’ competitiveness,” said Kim in a report. “We expect the BOK to cut its rate in the first quarter, particularly in March.”