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Exports Growth Signals Better Economy for South Korea Than Last Year

by YuGee / Sep 02, 2016 06:09 AM EDT
South Korea is the world's most innovative economy for three successive years, according to survey. (Photo by Chung Sung Jun/Getty Images)

The government claims that the economy is bouncing back following the rise in exports in August, the first time in 19 months that exports increase year on year and the current account surplus continued into July.

Also, the Ministry of Trade, Industry, and Energy mentioned that last month's rise in exports could have attained as high as 5 percent if automotive labor unions did not go on strike.

However, based on an article from Korea JoongAng Daily, the government is still hesitant when it comes to expecting that the favorable economic strength would continue, citing factors such as a potential interest rate hike by the U.S. Federal Reserve and continuing unpredictability in international oil prices might cause downward risks.

The growth in exports last month is 2.6 higher than the $40.1 billion revenue last year. The increase was the effect of the higher demand for major Korean export products that include Samsung Electronics' newest gadget Galaxy Note7, which attracted consumers worldwide for its iris-scanning function.

According to Cheong Seung Il, the Deputy Minister of Trade, Industry, and Energy, "Overall, exports finally bounced back for the first time in 20 months, the first time since December 2014, as increased exports of high-demand electronic products offset the decline in the automobile sector."

Meanwhile, Lee Min Woo, a Director at the Trade Ministry said, "There were two more business days this year compared to a year ago, and demand for computer products and other electronics rose significantly overseas ahead of the new school year coming up in September."

Cheong added, "Even though there have been five months so far this year that had more working days than a year earlier, exports still failed to bounce up. Major export goods performed much better [than in previous months]."

Park Eun Kyung, Samsung Securities Analyst, said that the country's export achievement in August is exceptional following the tension with China over the deployment of the United States' Terminal High altitude Area Defense (THAAD) antimissile system in the country.

Park commented, "It appears the Chinese are still interested in purchasing Korean goods, especially cosmetics, and the number of Chinese tourists that entered Korea in August is expected to reach an all-time high, which indicates that THAAD did not have much impact on their interest in Korean goods."

A new major contributor to exports also emerged last month, the e-commerce on Korean shopping sites.

Cheong explained, "Exports through e-commerce rose significantly compared to the past and are becoming one of the major export channels, or a newly-rising contributor to exports, here in Korea. The government has raised the export target for e-commerce this year from 1.5 trillion won to 2 trillion won."

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