According to the data released by the Korean customs on Sunday, the export growth rate in August has returned to double digits, with chip exports growing by nearly 39% year-on-year.

As the "canary" of the global economy, the growth of South Korea's export data not only heralds the recovery of the global economic outlook, but also reflects the strong global demand for technology products.

The growth in South Korea's exports is a good sign.

The data shows that without adjustment, South Korea's overall exports grew by 11.4% in August, while overall imports grew by 6%. The trade surplus reached 3.8 billion US dollars. After adjusting for working day differences, South Korea's exports in August increased by 13.7% compared to the same period last year.

Exports are the main engine of South Korea's economic growth, and semiconductors, automobiles, and refined oil are all key products driving South Korea's overall exports. Relevant departments predict that due to the global trade recovery, South Korea's economic growth rate this year will accelerate to around 2%.

South Korean manufacturers are present in various links of the global supply chain, so South Korea's export performance can be seen as a barometer of global business vitality. Like Brazil, Indonesia, Poland, and other emerging countries, South Korea is one of the biggest beneficiaries of global trade recovery this year.

In contrast, exports from developed countries are still weak. Citigroup economist Cole Langlois' team believes that this divergence is likely to continue in the second half of this year.

The performance of South Korea's exports has always been a factor preventing the South Korean central bank from adjusting its policy early. Although the market generally expects the Fed to begin cutting interest rates this month, economists cautiously predict that the South Korean central bank will wait until next month or later to lower interest rates in response to weak consumer demand.

Strong growth in chip exports

It is worth mentioning that South Korea has the largest share in global semiconductor sales. Under the global AI wave, chip manufacturers such as Samsung Electronics and SK Hynix in South Korea have made considerable profits. The latest export data shows that South Korea's semiconductor exports in August increased by 38.8% compared to the same period last year.

Madhavi Bokil, Senior Vice President of Moody's Ratings Strategy and Research, wrote in a report: "By next year, the cyclical increase in global semiconductor demand will help offset the sluggishness of the Korean domestic economy... We expect the external demand for AI-related chips and investments in new areas such as electric vehicles and renewable energy driven by the United States and the European Union to counteract the domestic weakness in Korea and support a growth rebound in Korea in 2024 and 2025 to 2.5% and 2.3%, respectively."

For South Korea, its foreign trade demand has always been led by major global economies: USA's Nvidia is the main supplier of its AI chips, and the robust demand for electric vehicles in the USA also benefits South Korean auto manufacturers. In addition, China is also a major buyer of South Korean electronic products and chips.

"Increasing reliance on trade with the USA carries risks, such as potential impact on the financial, fiscal, and business environment," said Je Heon Kim, interim director of the US-Korea Institute of Economic Research, in the report. "South Korea must respond to and manage these risks by continuing to diversify its trade and supply chains."

Editor/ping