South Korea’s Economic Outlook

By Jihoon Lee

SEOUL (Reuters) – South Korea’s exports are expected to have risen for an 11th straight month in August, according to a Reuters poll conducted between August 23-28. Economists noted strong momentum in Chinese demand.

Consumer inflation is anticipated to decrease to the central bank’s medium-term target of 2% for the first time in nearly 3-1/2 years.

Exports in August are forecast to have increased by 13.0% year-on-year, slightly lower than the 13.9% rise in July, which was the strongest since January. This reflects a robust demand for South Korean goods, attributed to base effects.

As the first major exporting economy to release monthly trade statistics, South Korea provides insight into global demand dynamics. Exports have been rising since October 2023, primarily driven by semiconductors and U.S. shipments related to artificial intelligence.

Economist Stephen Lee from Meritz Securities comments that while IT product exports, including semiconductors and computer parts, are accelerating, car sales are also bouncing back into growth.

In the first 20 days of August, exports surged by 18.5%, largely driven by semiconductor (up 42.5%) and automobile (up 7.9%) shipments. Exports to the U.S. climbed 18.0%, while those to China increased by 16.3%.

Economist Park Sang-hyun from iM Securities notes that the recovery in shipments to China is expected to lead to export growth in August.

The poll predicted a 6.3% year-on-year rise in imports, a slowdown from last month’s 10.5% increase, which was the highest since September 2022. South Korea’s trade balance is projected to achieve a surplus for the 15th consecutive month, with an estimated surplus of $4.67 billion, up from $3.60 billion in July.

The monthly survey also indicated that South Korea’s annual inflation likely moderated to 2.0% in August, down from 2.6% in July, marking the lowest rate since March 2021.

South Korea is set to release trade figures for August on Sunday, September 1, at 9 a.m. (0000 GMT), followed by inflation data on September 3.