South Korean exports in February tumbled in their 14th consecutive month of declines, with the longest slump in the country’s modern history underscoring how a slowdown in China is putting trade-reliant economies on the skids.
The bleak overseas sales from the world’s sixth-largest exporter, home to globe-trotting manufacturers of mobile phones to cars to ships, suggest policy makers will have their work cut as they seek to spark growth in the face of faltering demand, CNBC reported.
Lower oil prices also hurt South Korean exports in February, which dropped 12.2% from a year earlier to $36.42 billion, while imports slumped 14.6% to $29.02 billion, producing a $7.39 billion trade surplus.
February’s exports marked the longest period of consecutive annual declines on record and brought the country’s monthly exports in US dollar value down by 30% from a record high of $51.6 billion set in early 2014, official data shows.
The persistent weakness in exports robs the economy of a key engine of growth and is likely to add pressure on the country’s central bank to cut the policy interest rate further after two reductions last year.
“We expect manufacturing to be a drag on South Korea’s growth again in 2016,” Tim Condon, economist at ING in Singapore, said in a note to clients. “We also think growth worries will prompt the Bank of Korea to cut (the policy interest rate) by 25 bp to 1.25% in the second quarter.”
The Bank of Korea next reviews its policy on March 10.
Exports to China, South Korea’s largest market with one-quarter of total shipments, shrank 12.9% in February from a year earlier, overshadowing modest gains in sales both to the United States and the European Union.
South Korea’s February export decline was less than a revised 18.8% drop in January but this was likely due to there being one more working day in February this year than last year.
