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S.Korea Jan-Feb export fall 26%, outlook bleak

Posted on: March 2, 2009


Reuters – Monday, March 2

By Yoo Choonsik and Cheon Jong-woo

SEOUL, March 2 – South Korean exports in the first two months of 2009 tumbled by a quarter from a year earlier, and an even sharper slump in imports suggested the global downturn would keep overseas shipments falling for most of the year.

January-February imports plunged 31.4 percent, led by raw materials and machinery, as manufacturers cut production in anticipation of further weak demand for their goods in the face of the global slump that is pushing South Korea into recession.

Exports for the January-February, which analysts lumped together to remove distortion from the Lunar New Year holidays, fell 25.6 percent over a year earlier after a 17.9 percent fall in December, Ministry of Knowledge Economy data showed on Monday.

“The global economic situation is still very difficult. We forecast a continued decline in exports into the third quarter, with a positive turnaround possible from the fourth quarter,” said Lee Sung-kwon, chief economist at Goodmorning Shinhan Securities.

In February alone, Asia’s fourth-largest economy sold 17.1 percent less of its goods abroad than a year earlier after a record 33.8 percent loss in January, the ministry said. Imports fell 30.9 percent in February following a 31.9 percent drop in January.

South Korea is the first major Asian economy to report monthly trade figures, giving an early indication of the strength of global demand and the prospects for the region’s other export-dependent economies.

It sends around one-third of its total exports to China and the United States and about 14 percent to the European Union, its second largest individual market after China. Electronics and cars accounted for about 40 percent of the country’s total exports last year.

The relatively slower decline in imports of consumer goods than in goods for manufacturing activity also indicated that the aggressive round of stimulus packages offered by South Korean authorities had had some impact.

South Korea has announced around $100 billion worth of fiscal spending and tax cuts since the collapse of Lehman Brothers <LEH.N> wreaked havoc on the global economy last year, and promised to draw up additional spending plans this month.

The central bank also slashed interest rates by a total of 3.25 percentage points since October last year to a record low of 2.0 percent and is expected to cut the benchmark rate further down to around 1.5 percent.

The government hopes the stimulus packages will cushion the impact from the global recession and keep its economy from contracting more than 2 percent, whereas analysts see the gross domestic product shrinking as much as 7 percent.

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