South Korea's exports continued to grow last month, adding to optimistic prospects for economic growth and global trade this year. Data released by South Korea on Friday showed that exports, adjusted for differences in working days, rose 12.5% from a year earlier. Excluding the Lunar New Year holiday in February this year, overall exports increased by 4.8%, higher than the expected 4.1%; while overall imports fell by 13.1%. The trade surplus expanded to US$4.29 billion.
South Korea is a key link in global trade because Korean companies are widely positioned in various supply chains. South Korea's exports rebounded from a year-long slump late last year, driven by strong demand for semiconductors. Although car exports fell slightly, monitor sales continued to rise. The economic recovery has raised hopes that South Korea's economy will accelerate growth this year. The Bank of Korea last week maintained its forecast that South Korea's gross domestic product (GDP) will grow by 2.1% in 2024, indicating that exports will recover. According to the central bank, if this trend continues into 2025, it will help the economy grow by 2.3%.
However, slowing consumption and falling construction investment pose a threat to South Korea's economic momentum. The country is also wary of the impact of ongoing geopolitical tensions, including conflicts in the Middle East. A series of elections planned in many parts of the world this year are also adding to uncertainty about global trade policy. Fitch said earlier this month: "South Korean memory chipmakers' operating performance will improve over the next two years as demand for artificial intelligence spurs a memory upgrade cycle. A challenging economic outlook and ongoing geopolitical tensions remain key risks."
South Korea's exports maintained growth momentum in February, continuing January's strong export trend and marking a positive start to 2024. South Korea's overall exports rose 18% in January, compared with economists' forecasts for a 17.6% rise, helped by more working days compared with the same month last year. Overall imports fell by 7.8%, and the trade surplus narrowed to US$300 million.
A closer look shows that market demand for major Korean products remains strong. The biggest driver of the rebound in exports is memory chips. In February, South Korea's chip exports increased by 66.7% year-on-year, and display exports increased by 20.2% year-on-year. Overseas shipments of automobiles fell 7.8%. Overall wireless communication equipment exports fell by 16.5%, while ship exports increased by 27.7%. After adjusting for differences in working days, exports to China increased 4.8% from the same period last year, and exports to the United States increased 9%.
Other industries driving South Korea's exports include automobiles, petrochemicals and shipbuilding, which underpin the country's broad industrial base. Many Korean products are found throughout the global supply chain, making South Korea's shipments a good leading indicator of the health of global trade.
The International Monetary Fund (IMF) expects the global economy to grow 3.1% this year, below the historical average, as some central banks continue to fight inflation while fiscal support weakens and debt risks weigh on economic activity.