South Korea July exports jump though growth pace slows

South Korean exports jumped to a record high in July as overseas demand for chips and biohealth products extended export growth to a ninth consecutive month, supporting an economic recovery facing headwind from the country’s worst Covid-19 outbreak yet.

Exports rose 29.6 per cent in July from the same month a year earlier to US$55.43 billion, the largest amount since South Korea began compiling relevant data in 1956, the trade ministry said on Sunday.

The pace of growth, however, slowed from 39.8 per cent in June on a fading base effect from a pandemic-induced slump last year. The figure was also short of the 30.2 per cent median of 16 analyst estimates in a Reuters survey.

Imports soared 38.2 per cent from a year earlier and compared with a 40.7 per cent rise in June.With consumer sentiment weakening at home due to tightened social distancing measures since mid-July, the Bank of Korea is counting on global demand to lead economic growth which it forecasts at 4 per cent for this year.

While growth in exports was widely expected to slow, July exports of chips and biohealth products were brisk, gaining 39.6 per cent and 27.2 per cent, respectively. Exports of petrochemical products also surged 59.5 per cent, while those of cars and computers increased 12.3 per cent and 26.4 per cent respectively.

“Demand for main exports items across chips, cars, and petrochemical products remains strong, as economic recovery is being led by advanced nations,” said analyst Chun Kyu-yeon at Hana Financial Investment.”Having said that, the pace of growth will weaken on fading base effects, and some hiccups in supply chains are raising logistical costs also.”

By destination, exports to China — South Korea’s biggest trading partner — gained 15.7% on year. Overseas sales to the United States and the European Union also increased 32.1% and 43.9%, respectively. South Korea is currently battling its worst Covid-19 outbreak with record numbers of cases per day in the past week. Tighter curbs on movement and activity have been enacted to prevent spread of the coronavirus during South Korea’s peak summer holiday season.