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S.Korea May Exports Down 28%, Below Forecasts

South Korean exports and imports in May both dropped more than expected, data showed on Monday, dampening growing hopes for an early recovery in Asia's fourth-largest economy.

Korea, Korean Flag
CNBC.com
Korea, Korean Flag

Most big South Korean firms believe the economy will not likely recover in the near future as the global economic slump continues to depress exports, a separate private survey showed.

The data cemented views that the central bank will keep interest rates at a record low of 2.00 percent for the time being, analysts said.

"Exports will likely show year-on-year contraction until the third quarter. The recovery in the global economy is still slow," said Goh You-sun, an economist at Daewoo Securities.

"Given the economic trend, interest rates will likely be kept at the current level at least until the end of the year. There are some talk about excess liquidity but helping the economy recover is a priority," she added.

The country's exports in May fell 28.3 percent from a year ago, missing a 23.2 percent fall forecast in a Reuters poll, while imports declined 40.4 percent over a year ago, also more than expectations for a 36.3 percent loss, according to data from the Ministry of Knowledge Economy.

Overseas sales are expected to keep falling for the time being, but the decline is seen easing in June due to more working days, the ministry said in a statement.

South Korea posted a $5.15 billion trade surplus in May, compared with a revised $5.79 billion in the previous month.

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Exports value per working day -- a measure that analysts and government officials use to assess the monthly change in exports -- rose slightly to $1.28 billion in May from $1.27 billion in April.

Sales to China, the country's biggest overseas market, fell an estimated 22.8 percent during the first 20 days of May from a year earlier, compared with a 19.0 percent loss for all of April.

Exports to the United States declined 20.0 percent during the first 20 days of May over a year ago, compared with a 22.7 percent fall in April.

Overseas sales of cars plunged an estimated 53 percent in May from a year ago, with car parts exports down 39 percent, as General Motors and the U.S. government finalized plans for the battered company to reorganize.

South Korean financial markets showed a muted reaction to the trade figures.