(News Focus) S. Korea reels from record export plunge

By Lee Joon-seung
SEOUL, Feb. 2 (Yonhap) -- South Korea's trade-oriented economy was rocked in
January as exports plunged to record-low levels amid the ongoing global economic
slump, which has sapped overseas demand for locally made goods, the government
said Monday.
The 32.8 percent drop was the worst showing by the world's 11th-largest trading
economy since the government started releasing monthly statistics in 1980.
Exports during the cited month reached US$21.7 billion, or roughly half the total
reported for July 2008, when the country shipped out $41.0 billion worth of
goods. Imports were down 32.1 percent on-year to $24.6 billion as South Koreans
bought fewer consumer and capital goods.
The latest numbers are a blow since exports accounted for just under 40 percent
of the gross domestic product (GDP) in 2007, while the trade deficit of $2.9
billion may set the wrong tone for trade for the remainder of the year.
In 2008, the country reported a monthly trade surplus for only three months, with
the December tally reaching $542 million in the black. The total for the entire
year was a negative $13.2 billion, which is a serious reversal from a surplus of
14.6 billion in 2007. For 2009, Seoul said a trade surplus of around $11 billion
may be achieved.
A trade deficit could have negative consequences for foreign exchange rates and
complicate efforts to attract the foreign direct investment needed to create new
jobs and fuel economic growth.
The developments were not fully anticipated by the government, which said last
year that even if exports lost steam, the country would pull off a trade surplus
because imports were expected to fall at a faster pace.
Officials at the ministry responsible for industrial policy and trade promotion
claimed the export drop for last month was not as serious as those of South
Korea's trading partners, but conceded that the situation is bleak.
"Following the 1997 Asian financial crisis, South Korea had countries that bought
its products, but starting from last year, there has been a noticeable drop in
buyers," said Chung Jae-hoon, the head of the ministry's trade and investment
promotion office.
Reflecting the seriousness of conditions, exports to all regions except Oceania
contracted compared to the year before.
Exports to China, the United States and Japan fell 20-30 percent on-year last
month, while those to the European Union plummeted 46.9 percent due to the lack
of ships delivered during the month.
The across-the-board decline is doubly worrisome since countries in Latin America
and the Middle East, which have become important consumers of South Korean goods,
have started to cut back on orders.
Outbound shipments to the Middle East fell 7.5 percent compared to the year
before, while those going to Latin America fell 36.0 percent.
Experts said that due to the unprecedented nature of the economic difficulties,
the depreciation of the Korean won against other currencies -- such as the U.S.
dollar and the Japanese yen -- is having little positive impact and is
exacerbating the balance of trade. Technically, a weak won enhances the price
competitiveness of South Korean products abroad.
South Korea has to import most energy and raw materials from abroad, causing a
weak won to push up import costs and trigger stagnation concerns. The won fell 25
and 40 percent against the greenback and the yen, respectively, at the end of
last year compared to the year before.
"Due to the widespread global economic downturn, the foreign exchange rate is not
really helping at this juncture," said a researcher at the state-run Korea
Institute for International Economic Policy.
Further complicating the situation, foreign countries are moving to protect their
industries from imports, which could hinder Seoul's hopes of cashing in on
various economic support policies.
The Korea Trade-Investment Promotion Agency (KOTRA) said surveys conducted in the
last few months reviewed at least 40 cases of possible protectionist measures in
other countries, including a "Buy America" plan to get U.S. builders to use local
materials in large-scale construction projects.
Others, like Russia and India, have started raising import tariffs or have
instigated anti-dumping duties on South Korean-made steel products.
Related to the crisis, Knowledge Economy Minister Lee Youn-ho emphasized earlier
in the day that the economic situation is far more serious than previously
thought.
"It is impossible to tell when the economy will hit bottom, making it imperative
for the government to take all possible measures to stabilize the situation in
February," he said.
Echoing the need to take all available steps, policymakers pointed out that
special task forces have been set up to help companies expand their market shares
in China and other developing economies.
They said that while critics may call for a reevaluation of export targets for
this year, Seoul will hold onto its goal of shipping out $450 billion worth of
goods this year.
"Despite a rough start, there is reason to believe that things will improve in
the coming months," a working-level official said.
He said if the initial shock is contained, the first goal for the government will
be to strive for a balance of trade in February, with exports starting to post
positive gains in the second quarter or at the start of the second half at the
latest.
yonngong@yna.co.kr
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