South Korea’s Ministry of Trade, Industry and Energy announced Monday that the country’s exports took their biggest fall in almost six years, fueling concerns that a slump in overseas sales is hampering Asia’s fourth-largest economy.
Shipments dropped 10.9 percent from a year earlier, marking the fifth straight monthly decline, the Ministry said, noting that imports fell 15.3 percent while the trade surplus came to $6.32 billion.
Rate cut in the offing?
The bad economic news comes amidst the increasing debate about the impact of the Korean won’s strength against the yen and euro and whether it could prompt a rate cut by the Bank of Korea this month.
The won’s strength was at a seven-year high against the yen in May and at a nine-year high against the euro in April.
“There are debates whether rate cuts affect exchange rates and export performance” Oh Suk Tae, a Seoul-based economist for SG Securities Co., said. “But with domestic demand also just recovering, the BOK can’t just sit back.”
Korean Central Bank Governor Lee Ju Yeol said that sluggishness is not just a Korean problem but, the impact on the effect on the country is more prominent in light of its heavy reliance on export markets.
Lee also attributed the slowdown to there being fewer working days due to a public holiday in Korea and lower prices for petrochemical products due to drops in crude prices.
A Bloomberg survey of 27 analysts found 12 expecting another rate cut to 1.5% this year. Fourteen forecast no change, while one expects an increase to two percent.