June 1, 2018 / 12:54 AM / 3 months ago

UPDATE 1-S.Korea's May exports rebound sharply on robust global chip demand

(Adds analyst comment, details and economic context)

* Trade beats forecasts

* May exports +13.5 pct y/y (Reuters poll +12.7 pct)

* May imports +12.6 pct y/y (Reuters poll +10.7 pct)

By Cynthia Kim

SEOUL, June 1(Reuters) - Solid global demand for memory chips and petrochemical products helped South Korea’s exports return to growth in May, a welcome sign for Asia’s fourth-largest economy which is facing headwinds from weak domestic consumption and trade protectionism.

Shipments grew 13.5 percent to $50.9 billion from a year earlier, above the 12.7 percent forecast in a Reuters survey and a sharp rebound from a 1.5 percent contraction in April, government data showed on Friday.

The strong exports bounce should come as a relief to policymakers as the economy navigates challenges of a soft recovery in the job market, weak domestic consumption and global trade frictions amid a simmering U.S.-China tariff spat.

“The downturn in April was temporary from base effect. Exports isn’t doing bad at all,” said Lim Hye-youn an economist at Daishin Securities.

“Demand for memory chips is still supporting exports, but the pace of growth is likely to wane down towards the year-end on slowing global demand.”

South Korea is a leading suppliers of smartphones, displays and cars and is the first among major exporting countries to publish its monthly trade figures.

In April, exports fell 1.5 percent and marked the first decline since October 2016 when shipments fell 3.2 percent. The nation’s trade ministry said the decline was affected by a high base of comparison, as April 2017 saw bumper growth of 23.8 percent from shipments of expensive vessels.

There are worries the U.S. administration’s stiff tariffs on some exports from major trading partners could trigger counter-measures from many countries including China, South Korea’s biggest trading partner, and escalate global trade tensions.

Friday’s data also showed imports surged 12.6 percent in May, beating the 10.7 percent growth seen in the survey.

That produced a $6.7 billion trade surplus, up from the $6.6 billion in April.

A separate central bank statement on Friday showed the economy expanded 1.0 percent in the first quarter from three months earlier, slightly below the 1.1 percent estimated earlier.

The government is expecting annual growth of 3 percent this year, supported by the chip boom and an increase in fiscal spending.

Reporting by Cynthia Kim, Dahee Kim Editing by Shri Navaratnam

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