Korea Inc. suffers weak exports and domestic demand
The Korea economy can hardly see the light at the end of the tunnel due to the double whammy of weak exports and domestic demand, which show no signs of recovery this year.
A global economic think-tank said on April 1 that things would not get better soon. Goods exports of Korea tumbled 8.2 percent in March from a year ago after contracting 8.7 percent during the first two months of 2019.
The slowdown in outbound shipments can be attributable to the falling prices of semiconductors, one of the major export items of Asia’s No. 4 economy, according to Oxford Economics.
“Looking ahead, we expect Korean exports to remain under pressure as the global economy and Chinese demand continue to slow,” said Tommy Wu, a senior researcher at Oxford Economics.
“Meanwhile, the ICT slowdown continues to weigh heavily on exports by key electronics producers in Northeast Asia, although the tariff.”
Oxford Economics is a top-tier player in global forecasting and quantitative analysis.
In this climate, Wu expected that the Bank of Korea (BOK) will keep its policy rate on hold this year.
The central bank has raised the benchmark rate over the past two years in line with the rate hike of the United States. The rate now amounts to 1.75 percent, which is not so high. But it is 50 basis points higher than 2016 and 2017 when the rate was 1.25 percent.
On a more negative note, domestic demand keeps going down.
“On the domestic front, machinery investment in January-February was weaker than expected, falling 25.6 percent year on year, while retail sales volumes fell in March after consecutive pickups in November-February,” Wu said.
“Together, these point to weaker-than-expected demand in the first quarter. Given this backdrop, we now expect the BOK to pause for this year.”