South Korea's exports in January fell by 16.6% year-on-year, and the trade deficit reached US$12.69 billion, setting a new monthly high.

The picture shows the Port of Busan, South Korea.

(Reuters file photo)

[Financial Channel/Comprehensive Report] As exports weakened further, South Korea’s trade deficit hit a new high in January, sparking concerns that the economy may fall into recession due to deteriorating demand for semiconductors and continued rise in energy prices.

According to comprehensive foreign media reports, South Korea’s Ministry of Industry, Trade and Resources released data on Wednesday (1st) that exports in January fell by 16.6% year-on-year to US$46.27 billion (about NT$1.3 trillion), and imports fell by 2.6% to US$58.95 billion. US dollars (approximately NT$1.7 trillion), the trade deficit reached US$12.69 billion (approximately NT$380.2 billion), a record high in a single month.

This is also the first time in 25 years that South Korea has experienced a trade deficit for 11 consecutive months.

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Exports, the main engine of South Korea's economic growth, fell in October last year for the first time since the 2020 epidemic hit, and have declined for four consecutive months since then.

Semiconductors are South Korea's largest export commodity. Due to sluggish demand and falling memory chip prices, semiconductor exports plummeted 44.5%, further expanding from the 27.8% decline in the previous (December) month.

From a regional perspective, South Korea’s exports to China, its largest trading partner, fell by 31.4%, of which chip exports fell by more than 45%; exports to the United States fell by 6.1%, and exports to the Association of Southeast Asian Nations (ASEAN) fell by 19.8%.

The export slump could last for months as global consumption slows, and production remains weak as manufacturers are cautious about the outlook and South Korean companies exporting overseas have low confidence.

Economist Park Sang Hyun of HI Investment & Securities Co., Ltd. in Seoul said that the possibility of another economic contraction is increasing. The trade deficit not only hurts corporate profits but also hurts consumer spending, which will definitely bring pressure to the economy.

Citigroup forecasts a mild recession in South Korea this winter.

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