South Korea: Overcoming the COVID-19 Economic Crisis Through Trade
The Korea International Trade Association (KITA) recently shared some exciting data from 2020! This data suggests the country is on track for a solid economic year, despite the challenges caused by COVID-19.
According to KITA, there was a significant increase in the export of new growth items like eco-friendly cars and bio-health products during the pandemic. At the same time, South Korea’s flagship export item, semiconductors, maintained strong growth. In fact, semiconductor exports were estimated to be around $107.5 to $111 billion in 2020, a 10.2% increase compared to the previous year’s $99.2 billion. This positive trend is expected to continue in 2021.
Notably, South Korea’s export performance stood out compared to other major countries, and there was a rebound in exports during the second half of the year, contributing to the economic recovery in the third quarter.
If you’re interested in how South Korea used trade as a response to the COVID-19 economic crisis, keep reading.
Exports drive Economic Recovery
In 2020, Korea’s exports took a 6.4% hit, dropping down to $557.7 billion compared to the previous year. Similarly, imports also experienced a decline of 7.6%, falling to $465 billion.
Things weren’t looking great in the second quarter of this year either, as exports took a steep 20.3% dip compared to the same period last year, all thanks to the impact of COVID-19. However, the situation took a positive turn from the third quarter onwards, with a significant increase in exports, effectively reversing the earlier negative trend.
The second half of 2020 brought some much-needed relief. As exports and income started to pick up steam, profits skyrocketed from a mere $2.2 billion to an impressive $16.3 billion. This upward trajectory continued in the third and fourth quarters, with South Korea recording profits of $16.3 billion and $15.6 billion, respectively.
Global Exports
Even though the COVID-19 pandemic posed significant challenges for global commodity trade, South Korea managed to weather the storm better than other major countries such as Germany, Japan, and the United States. In fact, when we look at the data from January to August 2018, South Korea ranked fourth in terms of its ability to withstand and overcome the trade challenges brought about by COVID-19.
It’s worth noting that Hong Kong, China, and the Netherlands were also among the leaders in terms of export resilience during the tumultuous year of 2020. They demonstrated remarkable strength in navigating the difficult trade landscape caused by the pandemic.
Promising Industries in South Korea
South Korean exports have been fueled by the success of eight new industries, and some of the most noteworthy and lucrative ones include next-generation semiconductors, the bio-health industry, and eco-friendly vehicles. These sectors have been making waves and driving growth in the country’s export numbers.
Interestingly, the market for semiconductor memory gained traction in the wake of the COVID-19 outbreak. With the surge in data traffic caused by the widespread adoption of the “untact” lifestyle, there was a heightened demand for servers. As a result, exports naturally shifted gears to meet the increased demand for mobile devices, bouncing back after a challenging second quarter in 2020.
It’s worth mentioning that even before the serious effects of COVID-19 took hold in April, semiconductor exports had already seen a 3.1% increase compared to the previous year. This sector has been on a positive trajectory for some time.
Moreover, between January and October 2020, the bio-health industry witnessed a remarkable year-on-year export growth of 45.7%, surpassing the $10 billion mark for the first time ever. Not to be outdone, exports of eco-friendly cars saw a significant increase of 23.7%, while next-generation semiconductors experienced a notable growth rate of 12.1%. These numbers reflect the dynamic and thriving nature of these industries in South Korea’s export landscape!
Expansion of Korea’s share in the Import Market
Despite the challenging circumstances created by COVID-19 and the resulting decrease in global demand, it’s fascinating to observe that Korean products seem to have made significant gains in import markets across major countries, when compared to 2019.
For instance, exports to the US witnessed a notable 12% increase, while Japan experienced an 11% rise in imports of Korean goods. Even Taiwan, with a more modest increase, saw a 0.5% uptick in the share of Korean products entering its market. It’s worth noting that these numbers indicate a positive trend and reflect the resilience and appeal of Korean exports in the face of adversity.
Interestingly, Malaysia, although relatively smaller in comparison to other major countries, stood out by boasting the largest increase in the import share percentage of Korean products. This signifies a significant market expansion and suggests that Korean goods are gaining popularity and making their mark even in countries with smaller import volumes.
These developments highlight the increasing recognition and demand for Korean products worldwide, even during these challenging times.
Conclusion
KITA showed us that Korea’s exports this year are better than those of other major countries despite the global economic crisis and the financial challenges that COVID-19 brought. In particular, exports rebounded after the second half of 2020, leading to definite economic recovery in the third quarter.
The main achievements of this year’s exports include exports of new growth items such as eco-friendly cars and bio-health innovations. With a significant increase, it has established itself as a major global exporter, and semiconductor exports have maintained a solid growth trend.
In line with Korean consumption patterns, exports of “untact” products, home economy, and medical and hygiene related items increased significantly. The trend will continue well into 2021 and the future, even post “COVID” era.
To know more about South Korea’s economic, market, and business trends, check out the AJ Marketing Blog.
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