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| Chung Marn-ki, vice chairman of Korea International Trade Association (KITA), speaks of difficulties surrounding Korea's exports during a press conference held at the Trade Center in Seoul, Tuesday. Courtesy of KITA |
By Kim Hyun-bin
Korea's exports will likely contract by as much as 9 percent this year if semiconductor makers and other major exporters continue to face a decline in demand for their products overseas amid a deepening global economic downturn, according to the Korea International Trade Association (KITA), Tuesday.
KITA held a press conference on the recent slump in exports and countermeasures at the Trade Tower in Seoul, saying the country's exports from the beginning of the year to March 20 fell 13.4 percent year-on-year to $127.4 billion. Imports during the same period dropped 1.3 percent to $151.5 billion, resulting in a trade deficit of $24.1 billion, which is more than half of last year's annual deficit of $47.8 billion.
It predicted that if the sluggish exports continue until the end of the year, the annual export volume will decrease by 8.7 percent compared to the previous year. Even considering the fact that imports are expected to decrease this year due to a drop in international oil prices, this is expected to result in a trade deficit of $41 billion for 2023.
"If the price of semiconductors recovers in the second half of this year and external conditions improve with China's reopening, the extent of the decrease in exports will stop at around 3 percent, and the scale of the trade deficit can also be contained to $5.5 billion," KITA Vice Chairman Chung Marn-ki said.
KITA identified short-term factors dragging down exports, such as the deteriorating global economic growth rate and global trade growth rate, decreasing import demand in China, increasing export independence and a recession in the semiconductor industry.
In addition, Chung pointed out structural problems. Korean export products are composed mainly of intermediate goods, and the foundation of the export industry has deteriorated over the past five years due to the expansion of corporate regulations and the deterioration of labor flexibility.
KITA argued that productivity should be improved through labor flexibility in order to improve exports.
"Statistically, Korea's labor productivity per hour ($41.80) is significantly lower than that of other countries (OECD average of $54)," Chung said.
KITA diagnosed the need to ease the financial burden of exporting companies. According to the "survey on financial difficulties in the trading industry," which was conducted this month by KITA on 577 officials of export companies, 60 percent of the companies said that their financial situation was worse than last year. This was an increase of 14.3 percentage points from the first survey conducted in December last year.
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