South Korea's Exports Increase By Least in 13 Months

By William Sim

Nov. 3 (Bloomberg) -- South Korea's exports rose at the slowest pace in 13 months in October as shipments to China fell for the first time since 2002, adding to concern the nation is headed for its first recession in a decade.

Exports, which make up more than half of gross domestic product, increased 10 percent from a year earlier, the Ministry of Knowledge Economy said in Gwacheon today. That compares with September's 28.2 percent gain and the 12.5 percent median estimate of 13 economists surveyed by Bloomberg News.

Emerging Asian economies that account for one-fifth of world growth are being dragged down as their main markets in the U.S., Japan and Europe contract, raising the likelihood of a global recession. South Korea's government plans to unveil a stimulus package today as it tackles the worst crisis since the nation needed a $57 billion bailout by the International Monetary Fund in 1997.

``Things can get worse if emerging-market demand cools quickly,'' said Lee Sang Jae, an economist at Hyundai Securities Co. in Seoul. ``If China's economy cools more, it'll have a more serious impact on Korea's exports as we've been quite dependent on shipments to China.''

Exports to China, South Korea's biggest overseas market, fell 1.8 percent in the first 20 days of October.

India and China are accelerating efforts to prop up growth. India on Nov. 1 cut its benchmark repurchase rate for the second time in two weeks. China on Oct. 29 lowered its key rate, three days before a report showed manufacturing shrank.

Cars, Steel

Hyundai Motor Co., South Korea's second-biggest exporter, on Oct. 23 lowered its global vehicle-sales forecast for this year. Posco, Asia's biggest maker of stainless steel, said last month it will slash output by about a third this quarter to cope with a slowdown in demand.

South Korea posted a trade surplus of $1.22 billion in October, the first in five months, as import growth cooled to 12 percent on falling oil prices. The trade surplus will help ease pressure on the won, Asia's worst performing currency with a 36 percent slump against the dollar this year.

President Lee said today he'll take more action to support smaller companies to spur domestic demand and create more jobs.

The government has already promised $20 billion in tax cuts, 4.9 trillion won ($3.8 billion) in extra spending and at least 7 trillion won to aid the construction industry.

Slower Growth

Economic growth slowed to the weakest in four years last quarter, manufacturers and retailers have been firing workers this year as demand eases and Korean builders are reeling under the largest backlog of unsold homes in a decade.

The Bank of Korea last week cut interest rates by a record 75 basis points in an emergency move to restore confidence after the won plunged to a 10-year low and the Kospi stock index fell the most in at least two decades.

Figures today may show consumer prices rose by the least in six months in October, giving the central bank room to lower interest rates this week to spur growth, according to a survey of economists. The Bank of Korea's board next meets on Nov. 7.

Exports to Latin America surged 32.1 percent and sales to the Middle East jumped 22.4 percent, today's report showed. Shipments to the U.S. rose 10.8 percent.

Exports of semiconductors dropped 26.4 percent in October from a year earlier, while those of automobiles declined 14.3 percent. Sales of ships surged 118 percent.

South Korean factory output fell in September for a third month, the longest run of declines in almost eight years. Sales of consumer goods had the biggest decline in almost four years.

To contact the reporter on this story: William Sim in Seoul at wsim2@bloomberg.net.