South Korea’s export growth remained strong in September, driven by high global demand for semiconductors, contributing to optimistic economic growth forecasts. Adjusted for working-day differences, exports increased by 12.9% compared to the previous year, according to data from the customs office. Despite this robust momentum, headline exports saw a slower rise of 7.5%, while imports grew by 2.2%, leading to a widened trade surplus of US$6.7 billion.
As one of the world’s leading exporters of technology products, particularly memory chips used in various devices like laptops and smartphones, South Korea’s trade performance often reflects global demand. The sustained demand for semiconductors, a key driver of this year’s export performance, has helped bolster the country’s overall economic outlook.
Cho Chuel, an analyst at the Korea Institute for Industrial Economics & Trade, noted that while semiconductors continue to lead export growth, this year’s figures are partly amplified by comparisons to last year’s slump. Although export strength may taper off, the sector is unlikely to experience a sharp decline in the near future. This positive trend has prompted the central bank and the government to adjust their annual growth projections upwards.
However, inflation, which has returned to 2%, may prompt the Bank of Korea to cut interest rates soon. Although the strong export figures may give the central bank a reason to delay this policy shift, many economists still anticipate a rate cut in the coming weeks, given concerns over weak domestic consumption.
In another indicator of strong tech demand, semiconductor shipments rose 37.1% year-on-year in September, marking the 11th consecutive month of growth. This figure was slightly below the 38.8% increase recorded in August. Other key sectors also performed well: computer exports surged by 132%, and shipments of wireless communication devices increased by 19%, according to trade ministry data.
Memory chips used in artificial intelligence (AI) development have been a significant factor in South Korea’s economic momentum this year. Samsung Electronics Co. and SK Hynix Inc. have been competing for larger orders from Nvidia, a major US-based chipmaker leading in AI technology.
Beyond semiconductors, other export categories also posted gains. Automobile exports rose by 4.9% from a year earlier, and ship exports surged 76.2%, reflecting South Korea’s broad participation in global trade.
The United States has remained a reliable market for South Korea’s products, while trade with China has been more variable due to China’s ongoing economic challenges, particularly its property market downturn. Last month, China introduced a broad array of stimulus measures that could indirectly benefit South Korea if successful. In September, exports to China increased by 6.3% year-on-year, mainly due to demand for chips and mobile devices. Shipments to the US rose by 3.4%, while those to the European Union grew by 5.1%.
Economic ties between the US and South Korea have garnered attention, particularly as the US Federal Reserve recently shifted toward an easing cycle following a significant interest rate cut. The outlook for US demand remains critical for South Korea’s economic future. However, potential disruptions, such as impending strikes at several North American ports, could create uncertainties in global commerce.
Bloomberg’s Trade Tracker indicates mixed signals for global trade, with two out of ten key measures in “below normal” territory while the remaining eight are classified as “normal,” reflecting a balanced yet cautious global trade outlook.
Featured Image courtesy of IEEFA
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