Korea Exports Influenced by Unrest of US Economy

IMF warned a possibility of US financial unrest and international investment banking has been concerned about that US economy will be confronted with ‘Double Deep’ of re-stagnation.

Also, in South Americal, the Real of Brazil slumped to the lowest point and the Peso of Mexico suddenly dropped. Accordingly, ‘unrest of US economy‘ has been spread.

America is the major market for the export of Korea. However, the downhill of US and South America economy will influence the export of Korea and the whole economy.

▽Uncertain economy of American economy 〓 Stephan S. Roach, the chief economist of MORGAN STANLEY forecasted on June 20 “the provability that the growth rate of US GDP will be turned into negative (-) is approx. 40%”.

Dow Jones of US slumped to 9,253.79 decreasing continuously for 4 days. US trade deficit of April was USD 35.9 billion increased by 10.7% over the previous month. Accordingly, the USD/EUR has continuously decreased over EUR/USD.

Economy of South America has been in serious situations. Peso of Mexico was 9.98 Peso per dollar in an International foreign market on June 21. This is the biggest drop since July 2000 when Vicente Fox was inaugurated as the president.

Influenced by a financial crisis of Argentina, the financial market of Brazil seemed to be stagnant. Paul O`Neill, the US minister of Finance announced ‘It is inevitable that Brazil need a support of capitals. Real of Brazil continuously slumps to the lowest point every day.

▽Impact on Korea economy 〓The market of South American market is the major emerging market for Korea. Through main products such as a mobile phone, motorcar, ship and texture, its export occupies 6% in the whole exports and foreign investment of Korea respectively. Even in last year of the worst export, the exports to South America showed the growth of 3.8%, and currently have taken the trade profits of over USD 6 billion each year.

Gim Cheol-hee, the leader of foreign investigation team of KOTRA (Korea Trade -Investment Promotion Agency) explained that as the Real and Peso slumped, the import market of two countries has been shrunk. So, the importing quantity will decrease additionally”.

However, some experts analyzed that the unrest of US and South American economy was exaggerated.

Gang Mun-seong, the leader of US team of KIEP (Korea Institute for International Economic Policy) the unrest of recent US economy is brought from the financial unrest created after Enron Bankruptcy at the end of the last year. US object economy is in a stable recovery and so the economy of the second and third quarter will not go to the negative“.

Joong-Hyun Park sanjuck@donga.com