After showing a prolonged lull in growth rates, Korean exports finally began recording positive growth since November 2016. The long streak of sagging exports had stopped and a spike in exports continued for three consecutive months. Though the recent export volume is slightly lower than what it used to be a couple of years back, the jump in exports for more than three consecutive months is encouraging news to the Korean economy. Before making judgments about future export performances, however, it is important to figure out what factors have contributed to the recent improvements.
   The major factor behind this export turn-around is the exchange rate—especially the yen/won rate. From mid-2015 and onward, the yen/won rate began to surge from about 9 won per yen to 11.3 won by the middle of 2016, which is about 25 percent the yen appreciation rate against the won. This appreciation implies Korean exports have become more price competitive compared to its Japanese counterparts. As seen in the graph below, the movement of the yen/won exchange rate is closely related to Korean export growth. For example, the yen/won exchange rate began to fall for 12 quarters since Q4 of 2012 until Q3 of 2015, and this period of the depreciating yen matches exactly with the period of declining exports from Q3 of 2014 to Q3 of 2016. Judging from the structural relationship between the exchange rate and Korea’s trade, strong export growth will continue this year.
   Another major factor is the general improvement in the global economy. As the IMF forecasts suggested this January, the world economic outlook this year seems to be better than last year. The global economy is expected to grow 3.4 percent this year as opposed to 3.1 percent in 2016. The United States is expected to grow to 2.3

percent this year, compared 1.6 percent last year. Emerging market economies are expected to grow 4.6 percent this year, which is a significant improvement from 4.2 percent in 2016. On this note, circumstances are expected to improve throughout the world. If this is the case, then global exports will expand significantly and Korea should be going down the right path.
   Of course there are some challenges ahead. First, the U.S. Department of Treasury will decide on its watch list countries this April, and political and financial tensions could erupt. Second, the Federal Reserve is expected to raise the federal funds rate and this would cause the global interest rate to increase, which would discourage spending and investments. Third, the seemingly protectionist policy of the Trump administration, especially the border adjustment tax (BAT), or the re-examination of NAFTA and/or existing multilateral trade frameworks such as WTO might have a dampening effect on global trade. But free and fair trade is what the Trump administration really cherishes and global trade should eventually flourish as long as the notion of fair and free trade is kept intact. Fourth, how fast the Chinese economy will recover from its sluggish growth, and how the UK can continue smooth negotiations with EU are issues that still remain up in the air.

Despite all the uncertainties and risks, it is strongly believed that this year seems to be better than the last one. No matter what the decision of the Constitutional Court, sooner or later Korea is going to have a new president and new leadership this year.
   In order to accelerate export performances, Korea should fully utilize opportunities arising from the Trump administration’s investment in infrastructure. When it comes to the construction of dams, bridges, canals, pipelines, railroads and highways, Korean companies have been one of the most efficient in the field. Also Korea should continue to maintain its strong FTA network with the United States. Minor adjustments to it may be inevitable but the complete scraping of the agreement is unthinkable because the agreement centers heavily on mutual benefits for both countries.