Korean Economy Slows Amid Global Trade Tensions, Exports Decline 23.8%

The Korean economy is exhibiting signs of deceleration, according to a recent report from a government-affiliated think tank. The report underscores that various economic indicators across different sectors are reflecting this trend, primarily due to the deteriorating export conditions amidst growing concerns over global trade wars.

The Korea Development Institute (KDI) in its monthly economic assessment report stated, "Recent data indicates that the external environment has significantly worsened, and the Korean economy is facing a slowdown." Notably, the think tank used the term "slowdown" for the first time, which is a more severe assessment compared to previous evaluations that mentioned "economic downside risks" or "increasing downward pressure." This shift in language suggests that the persistent downside risks are now materializing into actual economic slowdown.

The KDI pointed out that the prolonged slump in the construction industry, coupled with the worsening global trade environment, continues to exert heavy pressure on Korea's export-oriented economy. The escalating trade tensions, driven by U.S. President Trump's increased tariff measures on major trading partners, have exacerbated concerns over global trade wars.

In April, Korea's exports grew by 3.7% year-on-year, marking the third consecutive month of growth. However, the daily average export volume decreased by 0.6% compared to the same period last year, indicating a weakening momentum. Notably, exports to the U.S. declined by 6.8% year-on-year, reaching 10.6 billion, leading to a 9 billion reduction in Korea's trade surplus with the U.S. The primary reasons for this decline include sluggish exports of automobiles, semiconductors, and machinery.

The Korean Customs Service reported that exports for the first 10 days of May decreased by 23.8% year-on-year. This decline underscores the challenges faced by Korea's export-driven economy, which relies heavily on global trade. The prolonged trade tensions and the resulting uncertainty have led to a cautious approach among businesses, further dampening export growth.

The think tank's report serves as a warning signal for policymakers and businesses alike, highlighting the need for proactive measures to mitigate the impact of global trade tensions. As the Korean economy continues to face headwinds, it remains to be seen how the government and private sector will respond to these challenges and navigate the uncertain economic landscape.