South Korea’s exports are likely to return to growth from October as the won’s drop helps companies win market share and global demand recovers, a government official said.
“Exports will narrow their declines in July to September, and post positive growth in October,” Lee Dong Geun, deputy minister for trade and investment policy at the Ministry of Knowledge Economy, said in an interview yesterday in Gwacheon. “A weaker won benefited us, and we tried to diversify our markets as well as our export products.”
A pickup in overseas shipments, which are equivalent to about half of gross domestic product, will revive an economy that has been supported by government spending and record interest-rate cuts. LG Display Co., the world’s second-biggest maker of liquid-crystal displays, said last week it can’t keep up with demand for its screens as orders surge.
“Our export outlook looks bright,” Lee, 52, said from his sixth-floor office at the ministry on the outskirts of Seoul.
Overseas shipments probably fell 18.7 percent in June from a year earlier, easing from May’s 28.5 percent drop, according to the median estimate in a Bloomberg News survey of eight economists. Export declined a record 34.5 percent in January.
The Ministry of Knowledge Economy is scheduled to release the June trade report at 10 a.m. local time tomorrow.
The Kospi stock index is headed for its best quarter since the three months ended June 2007 amid optimism of a global recovery. The index has risen 16 percent this quarter, extending this year’s gain to 24 percent after tumbling 41 percent in 2008.
South Korea’s trade surplus may exceed the government’s forecast this year as export declines moderate and cheaper oil costs reduce the nation’s import bill, Lee also said. In its semiannual outlook last week, the finance ministry predicted a 2009 trade surplus of $26 billion.
“There’s a possibility the trade surplus may top $30 billion,” Lee said. “It may be more than that if oil prices stabilize at below $70 per barrel.”
South Korea buys almost all its fuel overseas, making it the world’s fifth-biggest importer personal loans. The price of Dubai crude, a regional benchmark, has fallen by half in the past 12 months to about $69 a barrel.
The currency’s declines helped boost price competitiveness for Korean-made goods, Lee said. “A weaker currency helped, while our companies have strengthened technology and competitiveness.”
The won has drop 27 percent against the dollar since the beginning of 2008.
South Korea sells about 69 percent of its exports developing nations, more than twice the amount destined for developed countries. That has cushioned the nation against fallout from the global financial crisis which has been more severe on industrialized economies, the deputy minister said.
China buys about 22 percent of South Korea’s exports, while the U.S. takes about 11 percent, Japan receives 6.7 percent of shipments and the Middle East 6.3 percent, according to government data.
Industrial output advanced a more-than-expected 1.6 percent in May from April, the fifth straight gain, as exporters ramped up production to meet increased orders, the government reported today.
Hyundai Heavy Industries Co., the world’s largest shipbuilder, said last week that sales climbed about 9 percent in May as it built vessels at higher prices. Samsung Electronics Co., the world’s second-largest maker of mobile phones, said today the global handset market in the second half of 2009 should be better than in the first six months.
South Korea’s government last week raised its GDP forecast for 2009, saying the economy will shrink 1.5 percent this year, less than a previous prediction of a 2 percent decline. It expects growth of 4 percent next year.
Overseas shipments will fall 18 percent in the three months ending Sept. 30, moderating from a 25 percent drop in the first quarter and an estimated 22 percent fall in the second quarter, the state-run Export-Import Bank of Korea said in a report today.