General

On February 1, local time, customs data showed that South Korea's exports decreased by 16.6% year-on-year in January, while imports decreased by 2.6% year-on-year. The trade deficit hit a record high.

According to customs data, South Korea's exports in January fell 16.6% year-on-year to US $46.27 billion, which is the first consecutive four months of year-on-year decline since the beginning of 2020, and is expected to decline only 11.1%; Imports fell 2.6% year-on-year to US $58.96 billion, which was in line with expectations; According to customs data, the trade deficit expanded to 12.69 billion US dollars in January, a record high in a single month. This was the first time in 25 years that South Korea had a deficit in the balance of trade for 11 consecutive months after a continuous trade deficit from January 1995 to May 1997.

Due to the economic slowdown and weak global demand for chips and other products, South Korean exports fell for the fourth consecutive month. According to customs data, most of South Korea's energy demand depends on imports. According to customs data, its energy imports in January reached 15.8 billion US dollars, accounting for 26.8% of the total imports.

The downturn in overseas exports was the core reason for the contraction of South Korea's economy last quarter. With the slowdown in global consumption, this problem may continue for several months. South Korean exporters' confidence is low, industrial production is still weak, and manufacturers are cautious about consumer demand.

The global economy is slowing down as the global central bank sharply raised interest rates to curb inflation and the Ukrainian crisis pushed up oil and food prices. South Korea's export is a key "barometer" of global trade, because the country produces key products across the supply chain, such as chips, monitors and refined oil. South Korea is also the headquarters of some global chip manufacturers and smart phone manufacturers. The severe economic downturn is impacting these industries and dragging down the South Korean economy.

Fitch Solutions, an information service company under Fitch, said in a report that global demand may continue to be sluggish this year, while household debt, fiscal tightening and high borrowing costs have constrained the domestic recovery in South Korea. Therefore, South Korea's GDP may only grow by 1.5% this year, lower than the forecast of the Bank of Korea.

The Bank of Korea announced last month that it would raise the benchmark interest rate by 25 basis points to 3.5%. In the statement, the Bank of Korea said that due to the slowdown of the world economy, the rise of interest rates in many countries and other factors, the momentum of South Korea's economic growth will weaken, and it is expected that this year's economic growth will be lower than the 1.7% predicted in November last year.