South Korea’s trade balance

South Korea’s (EWY) trade surplus increased sharply to $11.4 billion in June 2017 compared to $5.7 billion in the previous month and $7.5 billion in the same month last year. An improved surplus in June 2017 was mainly driven by double-digit growth in exports.

The South Korean (EWY) economy is highly reliant on the external sector, which makes its economic growth dependent on trade dynamics. China (FXI) and the United States (SPY) are its (KOR) top two trading partners globally. These economies tend to impact South Korea’s (EEM) economic activity due to its heavy dependence on exports. South Korean exports surged in June 2017 in spite of recent political tensions between these two economies.

The graph below shows South Korea’s trade balance.

South Korea’s Trade Surplus Rose in June 2017, Exports Rebounded

South Korea’s trade surplus in June 2017

Exports in June 2017 stood at $51.4 billion, a rise of 13.7% year-over-year and 13.3% month-over-month. Exports saw six consecutive months of double-digit growth, which is the longest period of increase at such a pace since 2011. Imports stood at $40.0 billion, an 18.0% rise year-over-year and a 19.1% rise month-over-month as of June 2017.

South Korean exports rose year-over-year during 2Q17 compared to the previous quarter. Exports of products increased mainly for items such as semiconductors, display panels, petrochemicals, and oil refining products. Exports of construction equipment increased in 2Q17, largely due to a growing demand from China (FXI).

South Korea’s top export destinations include China (MCHI), the United States (SPY), Hong Kong (EWH), Vietnam (VNM), and Japan (EWJ).

Expectations

South Korean imports and exports are projected to rise 7.2% and 2.9%, respectively, in 2017, according to the monthly economic report of the Central Bank of South Korea. The consistent rise in imports compared to exports, however, could affect the trade surpluses reported since February 2012.

Let’s look at the manufacturing activity in South Korea in the next part of this series.

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