A woman walks along a snow-covered street in front of City Hall during snowfall in Seoul on January 26, 2023. The economy of South Korea inched towards its first recession in three years as data showed its trade deficit soared to a new record in January due to a combination of long holidays and cooling global demand.
Asia's fourth-largest economy, which relies heavily on trade for growth, shrank by 0.4 percent in the October-December quarter, and is now on the brink of falling into what would be its first recession since the middle of 2020 during the height of the COVID-19 pandemic.
Exports fell 16.6 percent in January from a year earlier, worse than an 11.3 percent decline predicted in a Reuters survey and the fastest drop in exports since May 2020, according to trade ministry data.
South Korea will support exporters as the economy shrinks as South Korea's economy shrinks.
Imports fell 2.6 percent compared to a year ago, less than a 3.6 percent drop predicted in the survey. The country posted a monthly trade deficit of $12.69 billion, setting a new record amount for any month.
Park Sang-hyun, economist at HI Investment and Securities, said that I have a zero percent forecast for the first quarter, but today's trade figures are definitely a minus.
The central bank's campaign to raise interest rates since late 2021 has led to growing bets in markets that the central bank's campaign of raising interest rates has run its course, as it's two consecutive quarters of decline in gross domestic product.
The trade ministry data shows that there was a 44.5 percent dive in semiconductor exports and a 31.4 percent plunge in sales to China in January, leading the sluggish trade performance in January.
Both were the worst rates of decline since the 2008 global financial crisis.
South Korean bond yields fell across the board on the growing bets for a less restrictive monetary policy ahead, while stock and currency investors shrugged off the monthly figures.
Finance Minister Choo Kyung-ho blamed a fall in computer chip prices compared to a year ago for the sharp declines in export values.
The government will mobilize all available policy resources to support a drive to boost exports so that the timing of trade balance can be improved, Choo said at a meeting of trade-related officials.
After posting a 6.1 percent gain in 2022, the trade ministry has said it would do what it can to avert a decline, which is why the government has predicted this year's exports would fall 4.5 percent.