SEOUL, KOREA -- According to data from the Korea Trade-Investment Promotion Agency (KOTRA), the growth of Korean exports is expected to abate due to uncertainties in the world economy, caused by economic slumps in developed countries.
By region, the growth rate of Korean exports to China will decrease but will still remain high for the upcoming year, at 12.5%, lower than 2011. In spite of an overall slowdown in the Chinese economy, exports to China are expected to grow steadily on the strength of the Chinese government’s import expansion policies, the expansion of the Chinese market and the reevaluation of the yuan.
Exports to the U.S. and Japan will be relatively favorable. Korea’s overall exports to advanced economies are projected to grow continuously thanks to the Korea-EU FTA, the Korea-US FTA, a strong Japanese yen, and the expansion of shares of Korean products in developed markets.
Korean exports to North America are expected to grow by 6.7% in the new year. The economic growth of the U.S. in the third quarter of 2011 reached its highest point since the fourth quarter of 2010. Thus many experts are less worried about the deterioration of the economic slump in the U.S., and the American economy is unlikely to experience a big economic slowdown. This does not mean that the U.S. economy will recover on a full scale, but Korean exporters will be better off due to the Korea-US FTA. The agreement will allow Korean companies a bigger access to the U.S. market thanks to a drop in tariffs, trade costs, and simplification of customs procedures.
In 2012, exports to Japan are expected to increase by 7.6%. The Japanese economy is projected to grow by 2.2% in the year ahead, thanks to restoration of production to pre-earthquake levels and an increase in demand for Japanese products by newly emerging countries. Moreover, Japanese consumers are increasingly buying Korean products due to a strong yen; and the Korean Wave is expected to enhance the image of Korean products among the Japanese.
Due to the ongoing economic crisis in Europe, exports are projected to decrease from 2011, by 1.4% from the previous year. More and more people are increasingly worried that the financial crisis in Greece may spread to bigger economies such as Italy and Spain. Anxiety on the euro-zone crisis, combined with high unemployment, will reduce consumer confidence to 2008 crisis levels. In major economies such as Germany, the U.K., France consumers are tightening their belts.
Korean exports to the Middle East and North Africa are expected to grow by 13.1%. As international oil prices are expected to stay high, economic conditions of oil-producing countries in the Middle East will be favorable. Democratization movements in the Middle East such as Egypt and Syria and the Iranian nuclear issue are feared to have a negative impact on exports to some of the countries in the region. As of November 2011, construction orders from Saudi Arabia stood at USD 15.5 billion, which accounted for 35% of Korea’s total overseas orders.
Korea’s exports to newly emerging markets are projected to grow faster in 2012. Demand for Korean capital goods and consumer goods is expected to grow due to the continued growth of emerging markets such as India, Brazil and Russia. Newly developing nations will be less impacted by economic crises in developed nations: there the middle class is on a steady rise, and the countries are expected to maintain their imports. Brazil and Russia are expected to increase their investments in order to prepare for international sporting events such as the FIFA World Cup and the Winter Olympic Games; their demand for construction machinery and large infrastructure such as airports and roads will grow.
Despite a slowdown in the economic growth in Southeast Asia in 2012, exports are expected to grow. It is also forecast that government-led investments in infrastructure will increase in Southeast Asia. The economic growth of Southwest Asian countries is expected to continue to grow steadily next year.
By products, exports of automobiles, auto-parts and petrochemical products are projected to increase sharply. Exports of Korean-made vehicles will increase, thanks to the enhanced competitiveness of Korean automobiles, the slowdown of Japanese companies due to the earthquake, and the flood in Thailand. It is forecast that exports of Korean petrochemical products will expand with high oil prices. An increase in energy exports is also projected due to the earthquake in Japan.
Exports of machinery, steel, wireless devices and electric home appliances are expected to increase steadily thanks to strong demand from newly developing countries in Asia, the CIS, Africa and Central and South America.
Semiconductors and displays are not expected to show much change due to a delay in the recovery of the world economy.
The economic recession in Europe is expected to decrease the region’s import of Korean vessels greatly -- Europe has been one of the most important markets for Korean shipbuilders. Computer exports are feared to decrease due to a decrease in demand from the spread of smart devices. It is projected that demand for machinery will not fully recover next year due to future economic uncertainties and tougher conditions for obtaining loans from financial institutions.
Machinery exports to the BRICs will continue to maintain 2011 levels as its member countries are not greatly affected by financial crises of developed countries. The Middle East and North Africa are expected to increase their import of Korean machinery. The expansion of machinery production facilities is also expected to have a big impact on increasing machinery exports.