Growth of South Korea's exports, the main driver behind its economic expansion, is likely to lose ground down the road due to a global economic slowdown, a report said Sunday.

   Despite a resilient gain in the value of overseas shipments, the South Korean economy will inevitably suffer a setback in exports should the global economic downturn take hold in the aftermath of the U.S. fiscal crisis, according to the report by LG Economic Research Institute.

   "In terms of volume, most industrial sectors saw their exports decline in the second quarter," the report said. "A U.S. economic slump will likely dampen South Korean exports, especially shipments of durable goods."

   A 1 percentage point drop in the growth rate of the global economy would cause exports of South Korea, Asia's fourth-largest economy, to decline 6.8 percentage points, according to the report.

   The U.S. fiscal crisis, sparked by its first-ever credit rating downgrade, has spawned concern that the world's largest economy may lapse into a double-dip recession, resulting in a global economic slump.

   In the first half of the year, South Korean exports rose 24.4 percent on-year to US$275.4 billion, with a slowdown expected in the second half. The government expects full-year to grow 19.4 percent on-year to $557 billion.

   The report also said the South Korean currency's appreciation against the U.S. dollar will likely put a crimp in its exports.

   "The South Korean won is expected to trend higher against the greenback," the report said. "In addition, the currencies of Asian competitors are unlikely to appreciate faster."

   A stronger won makes South Korean exports more expensive in overseas markets and erodes exporters' dollar earnings. The local currency has appreciated about 6 percent to the dollar since early this year.

Source: Yonhap News (August 21, 2011)