Setback to exports

Korea bears brunt of global economic tsunami

The coronavirus pandemic has begun to take its toll on South Korea as its exports plunged this month. According to the Korea Customs Service, the country's overseas shipments nosedived 26.9 percent to $21.7 billion in the first 20 days of April from a year ago. This figure appears to be a prelude to a further setback to export-oriented industries and the overall economy.

The steep shrinkage in exports is in contrast to the mere 0.2 percent in March. This indicates Asia's fourth-largest economy is just starting to feel the crippling impact of the global public health crisis. Even worse, the country's exports are expected to tumble by well over 40 percent for the entire month of April.

The spread of COVID-19 is showing signs of a slowdown as new daily infections are now leveling off worldwide. But the problem is that the global economy is likely to suffer its worst recession since the Great Depression of the 1930s. Lockdowns and quarantines have caused disruptions in global supply chains with the world economy grinding to a halt.

Thus it is inevitable for Korea to see its exports contract further, dealing a severe blow to the economy. The data showed that the country's major export industries are sustaining a sharp fall in their overseas shipments due to decreasing global demand. Exports of semiconductors, a key item, dropped 14.9 percent and those of automobiles fell 28.5 percent during the April 1 to 20 period. Shipments of mobile devices and auto parts plummeted 30.7 percent and 49.8 percent, respectively. Those of petrochemical products tumbled 53.5 percent.

The International Monetary Fund (IMF) predicted in its World Economic Outlook report last week that the Korean economy will contract 1.2 percent, a milder setback compared with a 3-percent contraction for the global economy. Yet, the country is feared to see a steeper economic shrinkage if its exports continue on a downward spiral for an extended period. Also worrisome is that Korea's exports to its major trading partners fell conspicuously. Shipments to China and the U.S. declined 17 percent and 17.5 percent, respectively. Those to the European Union shrank 32.6 percent and those to Vietnam plunged 39.5 percent.

The Moon Jae-in administration and the ruling party have vowed to work hard for an economic recovery after winning a landslide victory in the April 15 general election. Policymakers should not forget that the country cannot avoid an economic recession without reversing the export contraction. The government has already decided to extend 36 trillion won ($29 billion) in export financing to corporations. But the sum is insufficient. It is,

therefore, necessary to provide more financial and administrative support to boost overseas shipments.

Most of all, the authorities should help the auto, shipbuilding, petrochemical and other key industries ride out difficulties arising from the economic shock. They must mobilize all available means, including deregulation and innovation as well as relief packages, to increase exports and prop up the economy.