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U.S. downgrade may hurt IT, auto exports: report

Aug. 11, 2011 - 19:32 By
The U.S. credit rating downgrade is feared to hurt exports of South Korean-made information technology products and automobiles, a report by a private economic think tank said Wednesday.

The Hyundai Research Institute report said last week’s move by Standard and Poor’s Ratings Services to cut its credit rating of U.S. government bonds to “AA+” from a sterling “AAA” late last week has raised uncertainties in the financial market.

Such uncertainties could spill over into the consumer market, which could lead to a drop in sales of goods in the industrialized economies of North America and Europe, it said.

“South Korea relies heavily on overseas markets and detailed analysis shows exports of automobiles and IT products may be affected the most,” the institute said.

South Korea is one of the leading producers of IT products such as mobile phones, displays and semiconductors. The country also manufactured more than 2.47 million cars in the first seven months of this year with 1.81 million being shipped abroad.

Overseas sales are vital since South Korea’s relatively small domestic market cannot absorb all the products its companies can make.

Overseas market reliance for IT products currently stands at 65.0 percent, with numbers for automobiles going up to 37.9 percent for cars.

The HRI said that although reliance numbers are not as high as 85.2 percent reached by ships, both IT and autos are more easily affected by economic downturns and drops in consumer confidence.

Reflecting this, the institute said that sales of autos plunged 27.5 percent in 2009, as the global community tried to recover from the Lehman Brothers collapse a year earlier. IT shipments fell 4.2 percent on-year during the cited year.

The institute, meanwhile, said that to reduce the possible shock, Asia’s fourth largest economy needs to build up its domestic market so it can better absorb drops in overseas sales. 

(Yonhap News)