SEOUL (Reuters) – South Korea’s exports were seen contracting at the sharpest pace in nearly 11 years in April as the coronavirus pandemic caused massive disruptions to global supply chains and economic activity, a poll showed on Tuesday.
FILE PHOTO: A truck drives between shipping containers at a container terminal at Incheon port in Incheon, South Korea, May 26, 2016. REUTERS/Kim Hong-Ji/File Photo
Outbound shipments are expected to have shrunk 25.4% year-on-year, the worst contraction since May 2009 when it fell 29.4%, according to the median forecast in a Reuters poll of 11 economists. That compared with a 26.9% plunge in preliminary data for the first 20 days of the month and 0.7% drop in March.
“April exports are forecast to post a double-digit contraction from a year earlier due to fewer working days and sluggish sales to the United States and the European Union, hit by crippling demand from advanced economies,” said Chun Kyu-yeon, an economist at Hana Financial Investment.
“As intermediate goods account for a significant portion of total shipments, the ripple effect from the disrupted global value chain is inevitable … Korean exports will likely contract throughout the second quarter,” Chun added.
The poll also estimated that the nation’s imports this month would drop 17.1% year-on-year, the biggest decline since January 2016 and reversing a 0.3% gain in the previous month.
Economists worry that the lockdown in advanced economies and the struggle in labour markets will further weigh on regional demand.
Preliminary April 1-20 period data showed shipments to the United States and the European Union, which have imposed strict lockdowns, slumped 17.5% and 32.6%, respectively.
“The contraction in South Korea’s exports is expected to continue in the next two quarters, as the global economy slips into recession and job losses and income declines start to weigh on consumer demand for non-necessity goods,” said DBS economist Ma Tieying.
Infections have topped 2.97 million globally and approached 11,000 in South Korea.
This has hit business and pushed South Korea’s economy into its biggest contraction since 2008 in the first quarter, while local consumers turned the most pessimistic in more than 11 years, separate central bank data showed.
In the same poll, economists expected industrial output in March to shrink a seasonally adjusted 1.3% from a month earlier, a smaller decline than February’s 3.8% drop.
Eight economists also estimated consumer prices would rise a median 0.4% in April from a year earlier, slower than a 1.0% gain a month earlier.