South Korea's exports have continued to decline this month, fuelling concerns about the economic outlook ahead of the Bank of Korea's interest rate decision this week. The Korea Customs Service said on Tuesday that average daily export in the first 20 days of February fell 14.9% from a year earlier, implying further weakness in global demand. Data showed that from February 1 to 20, South Korea's overall exports fell by 2.3%, of which chip exports plummeted by 43.9%.
In addition, data showed South Korea's trade deficit hit $6 billion in the first 20 days of February, compared with $10 billion in the same period in January. South Korea's trade deficit reached $12.69 billion in January, a record high in a single month.
South Korean exports are a key barometer of global trade as South Korean makes key products such as chips, displays and refined oil across supply chains. Exports from South Korea, which relies on global trade, began to decline late last year as the global economic outlook deteriorated. Coupled with the Russia-Ukraine conflict and the tightening of monetary policy, a severe slump in demand for semiconductors worldwide is causing trouble for South Korea's exports.
South Korea's economy contracted in the fourth quarter last year for the first time in more than two years as trade worsened. Rhee Chang-yong, Governor of Bank of Korea cited falling exports, slumping energy prices and real estate as major problems. The Bank of Korea will announce its interest rate decision and a formal assessment of South Korea's economic and growth prospects this Thursday. Economists expect the Bank of Korea to keep its benchmark interest rate unchanged at 3.5% on Thursday to avoid further dragging on economic growth momentum.