Consecutive Aggravation of Export Payability For Two Quarters

An export payability of the third quarter (July to September) continued to become largely worse for two quarters after the second quarter(April to June).

According to the report of ‘State of the export payability’ published by Korea International Trade Association (KITA) on December 8, the export payability of the third quarter was 92.3 points decreased by 3.1 points over the second quarter.

The export payability index(on the basis of 100 in 1995) which indicates the export price level against a production cost was 98.3 points in the last fourth quarter (October to December). Then, it increased a little bit to 98.8% in the fist quarter (January to March), but decreased to 95.4 points for the second quarter and largely decreased in the third quarter.

Compared with that of the previous year, the export payability decreased by 6.0 points in the third quarter and so showed a consecutive decreasing tendency for three quarters.

The analysis says that it is because the export price largely decreased owing to a bullish tendency of Korean Won but the production cost a little decreased owing to the increasing labor costs.

The export price index of the third quarter (On the basis of Korean Won) came down by 4.3 points over the previous quarter as the exchange rate of Korean Won declined by 5.7%.

On the other hand, the production cost index of the third quarter had the decrease of 0.6 point. It is because the costs of importing materials increased owing to the decrease of the exchange rate, the financial costs decreased as an earning rate of debentures and loan rate decreased, and the labor costs largely increased.

It is estimated that the exchange of KRW-USD of the fourth quarter will increase by 2% over the third quarter and the payability of the fourth quarter of the fourth quarter will take a favorable turn.

Kim Ko-hyeon, researcher of trade institute under the KITA, “However, the general forecast on the KRW-USD exchange rate is highly likely to continue the decreasing tendency of this year due to a bearish trend based on the uncertain US economy. To increase the export payability, the exporting companies must improve the labor productivity and the government must control the increase of the business loan rate through policy.”

Mi-Kyung Jung mickey@donga.com