Recent Features and Implications of Korea’s Exports [BOK Issue Note 2023-23]

Macro Economy
exports IT China US EU
Research Department(02-759-4327)

1. Amidst the increased uncertainty in the global trade environment following the pandemic, our exports have been sluggish, much like other Asian countries with a high reliance on IT and China. However, as we entered the second quarter this year, there

were signs of easing in the downturn. Furthermore, while exports used to show similar trends by product and region they recently have been displaying heterogeneous patterns. Looking at specific product categories, IT-related items, especially semiconductors, have continued to decline significantly, whereas sectors like automobiles and shipbuilding have shown positive growth. Regionally, exports to China and ASEAN countries have been lackluster, but the situation is relatively favorable for exports to the US and the EU.

2. The fluctuation in exports appears to have been influenced by a combination of cyclical and structural factors. An analysis using the Constant Market Share (CMS) method to explain export variations indicates that for exports to China, 65% of the decrease in exports from January to April 2023 compared to the period from April to December 2022 can be attributed to cyclical factors primarily stemming from a reduction in China's own demand following their lockdown in 2022. The remaining 35% is attributed to competitive factors related to a decline in our market share within China. On the other hand, in the case of exports to the US, competitiveness has actually acted as a factor that has increased exports.

3. As the IT industry's downturn is expected to gradually ease in the future, exports are anticipated to improve, and the differentiation in exports by product and region is expected to decrease. Taking our export structure into consideration, it is expected that if there is a recovery in the global IT industry, it will positively impact exports to China and ASEAN, where the IT sector holds a significant share. Despite reduced domestic demand, the automotive sector is expected to continue its modest growth trajectory, primarily driven by exports to the US and the EU. 

4. However, even if the downturn in the IT industry eases in the latter half of the year, it is anticipated that exports may not rebound significantly as they did in the past due to structural changes in the Chinese economy. Despite this process, the recent increase in exports to the US indicates that the impact of structural factors can be positive based on the effective response to global supply chain reorganization. Therefore, it is essential to continue efforts aimed at diversifying export structures and securing technological competitiveness, as these efforts will be crucial in determining the extent of the influence of these structural factors.

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