South Korea’s exports declined the most in more than two years in April, amid concern that the won’s strength is undermining the competitiveness of sales abroad.
Overseas shipments fell 8.1 percent in April from a year earlier, the fourth straight monthly decline, the Ministry of Trade, Industry and Energy said on Friday. The median of 18 estimates in a Bloomberg survey was for a 6.6 percent drop.
The central bank has cut interest rates to a historic low and the government is spending a record budget and considering more fiscal stimulus in order to jump start Korea’s economy. The sluggish export performance is a risk to growth as sales abroad comprise roughly half the economy.
“Recovery in South Korea’s export destinations including Europe remains uncertain, and the won’s relative strength is also negative for exports,” Suh Dae Il, a Seoul-based economist for Daewoo Securities Co. said before the data release. “With domestic demand not strong either, we see the need for another interest rate cut within the first half of 2015.”
Imports fell 17.8 percent from a year earlier in April and the trade surplus was $8.5 billion, the ministry said.
The weakening of the yen and the euro has hurt Korean exporters from carmakers to machinery manufacturers, the trade ministry said. Shipments to Japan fell 12.6 percent while exports to Europe dropped 11.9 percent.
The won has appreciated to more than a seven-year high against the Japanese yen this month, while rising to a nine-year high versus the euro, data compiled by Bloomberg show.
Samsung Electronics Co. said Wednesday that it estimates a negative currency impact of 800 billion won ($744 million) in the first quarter. LG Electronics Co. also said the same day that its mobile phone sales growth was marginal in the first quarter due to negative currency impact.
South Korea’s economy grew 0.8 percent in the first quarter from the previous three months, when it expanded at the slowest pace since 2009. Central bank Governor Lee Ju Yeol said Tuesday that first quarter gross domestic product figures show the economy is on a recovery track, adding that a weak yen and a slowdown in China are external risks that could have negative impact on exports.
The Bank of Korea lowered its key interest rate in three steps since August, cutting to a record low of 1.75 percent last month. It next meets on May 15. Analysts were divided on the odds of another rate reduction this year, with 13 out of 28 analysts polled by Bloomberg expecting a cut to 1.5 percent and 14 seeing no change. One forecast an increase to 2 percent.
The government has allocated a record 375.4 trillion won budget for this year. Finance Minister Choi Kyung Hwan told lawmakers on April 21 that the government will consider measures to boost the economy if needed in the second half of 2015.
Markets were closed in South Korea on Friday for a holiday.