General

According to preliminary statistical data released by the South Korean Customs Office on the 21st, the country's export volume continued to decline in the first 20 days of March, with a trade deficit of 6.323 billion US dollars. At the same time, due to the uncertain prospects for the import of raw materials, several industrial challenges in South Korea have intensified, which may drag down economic growth.

According to customs data, South Korea's exports in the first 20 days of March fell 17.4% year-on-year to $30.945 billion. During the same period, imports decreased by 5.7% year-on-year to US $37.269 billion. According to customs data, there was a deficit of US $6.323 billion in trade revenue and expenditure, which increased compared to the same period last month (US $6.115 billion). This year, the cumulative trade deficit is 24.103 billion US dollars.

The Yonhap news agency reported that South Korea's trade balance has been in deficit for 12 consecutive months since March last year. After January 1995 to May 1997, South Korea again experienced a trade deficit that lasted for more than a year.

According to customs data, by category, the export value of semiconductors decreased by 44.7% year-on-year. As of February, the monthly export volume of semiconductors had declined year-on-year for seven consecutive months, and it is likely to continue to decline in March.

South Korean Trade Minister Lu Hangu said on the 21st that South Korea's export difficulties will continue to exist for some time to come, and South Korea is closely monitoring the global market situation, especially the plight of the banking industry.

Industry insiders pointed out that in the process of global economic recovery, the United States has imposed trade sanctions from multiple perspectives, including restrictions on chip and communication equipment companies. After the outbreak, consumer demand for mobile phones and other products has been insufficient, resulting in a blow to the semiconductor industry and a drag on South Korean exports. According to customs data, although South Korean automobile exports have increased by 69.6% year-on-year in recent years, factors such as slowing global economic growth, capacity release after the epidemic, and intensified competition will have a negative impact on South Korean exports.

Analysts said that the downturn in overseas exports was the core reason for South Korea's economic contraction in the first quarter, and as global consumption slows, this issue may continue for several months. Currently, South Korean exporters have low confidence, industrial production remains weak, and manufacturers are cautious about consumer demand.

The deteriorating trade situation has also affected South Korea's industrial sector to a certain extent. Due to difficulties in the supply of raw materials and unclear technological prospects, South Korean officials decided on the 21st to lower greenhouse gas emission reduction targets for the industrial sector. According to the adjusted target, by 2030, the industrial sector will be required to reduce emissions by 11.4% from 2018 levels, compared to the previous reduction target of 14.5%.

Due to the impact of trade contraction, the Bank of Korea (Bank of Korea) released its "Economic Outlook Update Report" in late February, which lowered its real gross domestic product (GDP) growth forecast for 2023 from the original 1.7% to 1.6%.