News from the Financial Associated Press on January 2 (edited by Zhou Ziyi)Signs of global demand cooling are becoming more and more obvious. South Korea’s exports, known as the “global economic canary”, continued to decline in December.
According to data released by the South Korean Ministry of Trade on Sunday, exports in December fell by 9.5% from a year earlier, economists predicted -11.1%, the previous value was -14%, and imports fell by 2.4% year-on-year.
In 2022, South Korea’s exports will increase by 6.1%, imports will increase by 18.9%, and the annual trade deficit will be US$47.2 billion, a record high.It was the first annual deficit since the global financial crisis. The trade deficit was $4.7 billion in December.
South Korea’s exports have long been seen as a major barometer of global business and technology demand, as South Korea is a major exporter of chips, displays and refined oil.
South Korea’s economic risk escalates
The Bank of Korea’s continued interest rate hikes are a factor contributing to the weakening economy. In the past year, the Bank of Korea has followed the pace of the Federal Reserve to raise interest rates and tighten policy. For the Bank of Korea, trade resilience has been a key source of assurance that the economy can withstand higher borrowing costs.
But now, with the global economy slowing and rising oil prices hitting many trade-dependent countries, the Bank of Korea’s rate-hiking cycle may be drawing to a close.
The contraction in South Korea’s monthly shipments began in October last year, mainly due to weakening demand for chips.
Semiconductor sales fell 29.1 percent in December from a year earlier, the fifth straight monthly decline, trade ministry data showed. Also, semiconductor makers are adapting to slowing demand, with South Korean chip production shrinking for a fourth straight month, with the biggest cut in November since 2009.
Labor disputes in South Korea are another factor that could hit the economy. Soaring prices triggered dissatisfaction among workers, and a nationwide truck driver strike put severe pressure on supply chains in South Korea, which lasted for half a month until early last month.
Various factors complicate the trade outlook, including high global inflation, China’s epidemic prevention and control entering a new stage, and uncertainty about the progress of the Russia-Ukraine conflict. South Korea’s finance ministry expects exports may fall by 4.5 percent in 2023, while imports may fall by 6.4 percent.