Gloomy export outlook
Time to take action to restructure economy
The country marked its 55th Export Day on Wednesday. Its exports are expected to hit a record high of $600 billion by the end of the year. This figure makes South Korea the world's sixth-biggest exporter. Nevertheless, this special day came and went with little fanfare because of a gloomy outlook for next year.
For starters, it is evident that exports have begun to lose steam. According to official statistics, the export growth rate shrank from 9.8 percent in the first quarter to 3.1 percent in the second quarter and 1.7 percent in the third quarter. More worrisome is that this declining trend will continue in 2019.
The state-funded Korea Institute for Industrial Economics & Trade (KIET) predicted the country's exports to grow 3.7 percent next year, far lower than this year's estimated 6.4 percent. It is inevitable for the shipments of Korean-made goods to grow at a slower rate due to the U.S.-China trade war and an anticipated global economic slowdown.
The projected lower export growth will deal a severe setback to the Korean economy which is reeling from a sizable contraction in domestic demand, investment and employment.
The problem is more serious when we take a closer look at Korea's excessive reliance on the world's two largest economies ― the U.S. and China. The country's exports to China and the U.S. accounted for 24.8 percent and 11.9 percent, respectively, of the total exports in 2017. This indicated 36.7 percent of Korea's exports went to the G2.
Washington and Beijing declared a ceasefire in their tariff war during a meeting last week between U.S. President Donald Trump and Chinese President Xi Jinping on the sidelines of the G20 summit in Buenos Aires, Argentina. But few believe the two giants will easily find a negotiated solution to their trade dispute anytime soon.
Another problem is Korea's undue dependence on semiconductors for export growth. In the first 11 months of the year, semiconductor exports were estimated at $113 billion, or 21.1 percent of total exports. The percentage was higher than last year's 17.1 percent. This is certainly a cause for concern, given that the country's exports could tumble if the global boom for semiconductors goes bust.
The growth rate of semiconductor exports plunged to 11.6 percent last month from 53.3 percent in January. This seems to herald an end to the so-called global super cycle of semiconductors. The prices of memory chips are on the decline. Making matters worse, shipments of other key export items such as cars, mobile phones and equipment, flat panels and steel have also started to decrease at a rapid pace.
Now the government and the business community should work together to minimize the fallout of the export slowdown. They also must push for economic restructuring to improve the competitiveness of Korea Inc. Most of all, the country ought to create a more favorable business environment by promoting deregulation and innovation.
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