Both South Korea’s and Hong Kong’s exports plummeted in February, and industry watchers forecast that both countries will not see much relief from the downward trend in the near term.
South Korea’s exports plunged 12.2% year-on-year in February, following an 18.8% drop tallied in January, reported Yonhap.
Exports have reportedly been on a steady decline since the first month of 2015 due to weak overseas demand. The country’s industrial output also fell for three months in a row in January.
As such, major think tanks and investment banks are predicting much lower annual growth for South Korea this year than the number being targeted by the government, citing falling exports and growing worries over the global economy.
According to their recent reports and analyses of the latest economic conditions, think tanks and investment banks at home and abroad put their growth outlooks for Asia’s fourth largest economy at a band of 1% to 2.6% for this year.
The figures are much lower than the 3.1% projection made by the government earlier this year.
Goldman Sachs expects the Korean economy to grow 2.4% this year, which is down from its earlier prediction of 2.6%.
JP Morgan slashed its growth outlook from 3% to 2.6%. In a report on the global economy compiled in mid-March, it even worried that the growth rate could fall to as low as 1% in its worst scenario.
Local investment banks are also painting gloomy outlooks, with the worst prediction of 2.2%. Many of them are also planning to lower them further down the road citing both slowing domestic demand and exports, according to their recent reports.
Experts cited worse-than-expected market prospects in China and the slowing global economy as reasons for such gloomy outlooks, as they could serve as a heavy drag on South Korea’s exports-driven economy.
The government, however, seems to be holding a somewhat different take on the economy, dismissing the market projection as not reflecting recent “improving” economic data.
A government official said on condition of anonymity that things are getting better with major indexes, including industrial output, showing signs of improvement recently. “This month’s exports decline has also slowed to a single digit with the overall volume staying in positive territory,” he explained.
HK exports and imports fall
On the other hand, Hong Kong’s total exports in February fell 10.4% year-on-year, while the value of imports dropped 10.1%, the Census & Statistics Department announced.
The value of total goods exports for the month decreased to HKD204.5 billion (US$26.4 billion) from a year earlier, after a year-on-year decrease of 3.8% in January.
Within this total, the value of re-exports decreased 10.5% to HKD201.8 billion, while domestic exports decreased 8.4% to HKD2.7 billion. The value of goods imports fell 10.1% to HKD237.6 billion, after a year-on-year decrease of 9% in January.
A visible trade deficit of HKD33.1 billion, equivalent to 13.9% of goods imports value, was recorded in February.
A government spokesman said merchandise exports stayed sluggish in February. Taking the first two months of 2016 together to remove the distortion caused by the difference in timing of the Chinese New Year holidays, the value of merchandise exports saw a larger year-on-year decline than in the fourth quarter of 2015, reflecting the weak global demand conditions, which affected the export performance of many Asian economies.
The official continued that Hong Kong’s external trading environment “will still be subject to considerable downside risks in the near term, including those arising from a slow-growing global economy, US monetary policy normalisation, diverging monetary policies among major central banks and heightened geopolitical tensions in different parts of the world.”
Photo: Public Domain
