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Without doubt, sluggish export performance had been one of the chronic malaises that dragged down the Korean economy in 2018. Peaking at 15.8 percent in 2017, the export growth rate slowed down to 5.4 percent in 2018, and eventually plummeted to two negative growth points of –10.4 percent in 2019, followed by –5.5 percent in 2020. Back to back negative export growth had happened only twice since 1960. First it occurred in 2015-2016, then in 2019-2020. Consequently, the export value, once reached a record level of USD 605 billion in 2018, dwindled to USD 512 billion by the end of 2020, which was lower than the 2011 level of USD 555 billion. Naturally, economic growth rate slip down from 3.2 percent in 2017 to 2.9 percent in 2018 and 2.0 percent in 2019.
One might wonder why Korean exports have slowed down since 2018 even before the COVID-19 pandemic, and they might easily tempted to connect it to semiconductor exports, the most dominant component of the country’s exports. Indeed, the semiconductor exports slowed down significantly during 2019 and 2020 after showing unprecedented growth in 2017 and 2018, which in turn, had contributed to the downfall of overall export.
However, this should not disguise the fact that exports excluding the semiconductors showed exactly the same pattern as the total exports, meaning that the 70 percent of exports excluding semiconductors tells the same story in 2019 and 2020. This means that the semiconductor industry cycle can only explain a part of the truth.
No matter what was behind it all, Korea’s exports have shown tremendous rebound since the fall of 2020. The rate of export growth surged to 7.1 percent year on year in September, 2020 and reached 12.6 percent in December of that year. This growth trend continued in January and February, 2021, demonstrating 11.4 percent and 9.5 percent, respectively. For the first two months of 2021, total exports grew 10.5 percent, and export figures excluding semiconductor exports jumped 8.2 percent. This means that exports are recovering not just in the semiconductor sector but throughout the whole spectrum of commodities. For example, automobile exports increased by 43.3 percent, marine structures and ships by 16.8 percent, and synthetic chemical resins by 25.8 percent. Of course, there are still some lagging industries such as petroleum products and auto-parts, but the general export environment has become very favorable compared to the previous two years.
After several years of unprecedented public expenditures, the rapid accumulation of national debt and the worsening of fiscal integrity have required the government to be less dependent upon the public expenditure policy as was the case in the past. The current public sector-led growth policy was successful only in preventing an economic meltdown, but it is not enough to make positive economic growth sustainable for the indefinite horizon. At this very critical juncture, the excellent performance of exports is shedding an invigorating light for sustainable growth in the coming years. It is easy to forget the importance of exports for sustainable growth and job creation, especially for Korea, but nobody should take exports for granted. As such, the government has to pay more attention and encourage furthering the country’s exports.
By Professor Se Don Shin
Dean, Sookmyung Women’s University
The opinions expressed in this article are the author’s own and do not reflect the views of KOTRA