South Korea’s January Exports Decline by Record 32.8%

By William Sim

Feb. 2 (Bloomberg) -- South Korea’s exports tumbled by a record 32.8 percent in January, foreshadowing a deepening slump in Asia’s export-driven economies.

Shipments fell by the most since figures were first compiled in 1957, and at almost twice the pace of December’s 17.9 percent decline, the Ministry of Knowledge Economy said in Gwacheon today. The trade report is among the region’s first economic indicators for January.

Faltering exports suggest the economy is headed for its first recession since the Asian financial crisis a decade ago and increases pressure on policy makers to accelerate stimulus measures and interest-rate cuts. South Korea’s Posco, Asia’s third-largest steelmaker, will extend production cuts for a third month in February, spokeswoman Ko Min Jin said today.

“We can’t escape the global recession,” said Chun Chong Woo, an economist at Standard Chartered First Bank Korea Ltd. in Seoul. “Policy makers need to take more steps to protect the economy from the global shock.”

The median estimate was for a 29.1 percent export drop, according to a Bloomberg survey of economists. Imports fell 32.1 percent, and the trade deficit was $2.97 billion in January.

Korea’s won, the region’s worst performing currency last year, slipped 0.9 percent to 1,392.5 per dollar at 10 a.m. in Seoul. The Kospi share index gained 0.5 percent to 1,167.7.

The MSCI Asia-Pacific Index lost 1.8 percent to 81.59 as of 9:54 a.m. in Tokyo. Four stocks declined for each that advanced.

Regional Decline

Evidence of the region’s deepening slump is mounting.

Planned investment in Australia dropped last quarter for the first time in four years as mining companies scaled back production amid tumbling commodity prices, research-company Access Economics reported today.

Japanese manufacturers, including NEC Corp. and Hitachi Ltd., announced at least 30,000 job cuts on Jan. 30. Factory production in Asia’s largest economy slumped an unprecedented 9.6 percent in December from the previous month.

Global airport freight traffic decreased 19.7 percent in December from a year earlier, the Geneva-based Airports Council International reported Jan. 30. Freight passing through airports in Asia Pacific tumbled 23.4 percent last month.

South Korea’s industrial production fell by a record in December as Hyundai Motor Co., Hynix Semiconductor Inc. and LG Display Co. reduced output to cope with sagging demand.

“Things are getting worse as the global recession spills over to China and other emerging economies,” said Lee Sang Jae, an economist at Hyundai Securities Co. in Seoul.

Sales to China

Exports to China, the nation’s biggest overseas market, tumbled 32.2 percent during the first 20 days of January, today’s report showed.

Shipments to the U.S. declined 21.5 percent, exports to the Europe Union plunged 46.9 percent and sales to Latin America dropped 36 percent. Exports to the Middle East fell 7.5 percent.

South Korea has allocated about 140 trillion won ($101 billion) in extra liquidity, tax cuts and spending, and the central bank has reduced interest rates to a record low.

The global economy will expand 0.5 percent this year, the weakest gain in the postwar era as more than $2 trillion of bad assets from the U.S. help sink economies from Russia to the U.K., the International Monetary Fund said on Jan. 28.

South Korea’s exports of semiconductors plunged 47 percent in January from a year earlier, and those of automobiles declined 55 percent. Sales of ships rose 20 percent.

Corporate Losses

Samsung Electronics Co., the world’s largest maker of memory chips, liquid-crystal displays and televisions, reported last week its first quarterly loss as the global recession drove down prices.

Confidence among South Korean manufacturers remained close to a record low, a central bank index showed last week.

A report today may show consumer prices rose by the least in 10 months in January, giving the Bank of Korea room to lower borrowing costs further to spur growth, according to a Bloomberg survey of economists.

The central bank cut its rate to a record 2.5 percent on Jan. 9, the fifth reduction since October. The bank has signaled it’s ready to act again when the board meets on Feb. 12.

Households, struggling with record debt, are losing confidence as unemployment rises and as falling stock and property prices reduce their wealth. Employment dropped in December for the first time since October 2003.

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