South Korea saw its annual export growth slow down for the fourth consecutive year in 2014, threatening to weaken the nation’s economic fundamentals.
According to the Korea International Trade Association and the Ministry of Trade, Industry and Energy, the yearly export growth stood at 4.4 percent in 2014. It has been on a downward trend since peaking at 22 percent in 2010 ― 13.9 percent in 2011, 5.6 percent in 2012 and 4.8 percent in 2013.
Among the major factors undermining the export-driven economy are economic slowdowns in China and Europe and the weakening price competitiveness of Korean products due to the weak Japanese currency, researchers said.
While China takes up about 25 percent of Korea’s exports as the biggest export destination, the Asian superpower reported its GDP growth of 7 percent during the first quarter of 2015 ― the lowest quarterly growth in six years after it recorded 6.2 percent in the fourth quarter of 2009.
Some of the eurozone economies underwent severe financial difficulties over the past few years, which was a barrier for the active advancement of Korean products despite the Korea-EU free trade agreement.
The Japanese yen’s historic weakness against the Korean won and major currencies is also believed to have hampered the popularity of products including vehicles from Hyundai Motor and Kia Motors in the global market.
Economists, however, agreed that it was a matter of concern that the “processing trade” with China has plunged. That trade had been a key contributor to Korea’s overseas shipments in petrochemicals and home electronics.
Under the formerly bullish processing trade, China had been assembling knockdown products, delivered by Korean firms, for exports to third countries.
“But as China is pushing forth the expansion of its independent rollout of industrial products, Korea has no choice but to see a sharp decline in the processing trade,” said a report from Hyundai Economic Research Institute. “Further, China has issued a ban on 1,871 items for processing trade.”
Economic policymakers have faced the daunting task of increasing the number of items that are 100-percent manufactured in Korea, as well as raising the quality and brand value to compete with Japanese and Chinese products.
By Kim Yon-se (kys@heraldcorp.com)