S Korea July exports rise at faster pace, but risks to outlook grow

South Korea’s exports grew at a faster annual pace in July as robust demand from the United States offset weak sales to China, though the trade and broad economic outlook was clouded by slowing global growth amid rapidly rising borrowing costs.

Outbound shipments rose 9.4 per cent in July from a year earlier to $60.70 billion, matching the forecast in a Reuters poll, trade ministry data showed on Monday, after a 5.2 per cent rise in the previous month.

The stronger exports growth provides some relief to policymakers, as a global shift towards tighter policy to fight inflation has stoked worries about a steep economic downturn.

“There were worries of a steep slowdown, but thanks to high export prices and solid demand from the United States, the export growth managed to continue a decent trend, especially considering fewer working days,” said Park Sang-hyun, chief economist at HI Investment and Securities.

“However, setting aside the demand from the United States, outlook for Europe does not seem as bright, and China’s economy is not recovering as strongly as expected, which will keep the growth rate in the single-digit level for the time being.”

The International Monetary Fund last week warned that downside risks from high inflation and the Ukraine war were materializing and could push the world economy to the brink of recession if left unchecked.

The latest trade figures from Asia’s fourth-biggest economy showed exports grew 14.1 per cent on average per working day, as there was one fewer working day in July from the same month a year earlier.

Imports gained 21.8 per cent to $65.37 billion, faster than 19.4 per cent a month earlier and 20.7 per cent seen in the survey.

The result was a $4.67 billion trade deficit, marking the biggest in six months and fourth straight monthly deficit in a row.

Shipments to the United States gained 14.6 per cent from a year earlier, following 12.2 per cent rise in June, to the biggest monthly amount on record. Exports to the European Union also added 14.6 per cent, a welcome sign for Korea’s globe-trotting manufacturers facing pressure from a slowing world economy.

However, the headwinds to Europe’s economy have intensified and some expect a mild recession during the second half of the year.

And, overseas sales of South Korean goods to China fell for a second month by 2.5 per cent, amid fallout from COVID-19 outbreaks in recent months.