South Korea March exports contract for fourth month, puts policymakers on notice

SEOUL (Reuters) - South Korea’s exports contracted for a fourth month in March but at a slower rate in a sign of continued strain on the trade reliant economy, putting pressure on policymakers to shift to an easing stance to ward off growing external risks.

FILE PHOTO: A container terminal is seen at Incheon port in Incheon, South Korea, May 26, 2016. REUTERS/Kim Hong-Ji/File Photo

Overseas sales slid 8.2 percent in annual terms, slightly outperforming a 8.7 percent decline tipped in a Reuters survey but extending the contraction that begin in December.

Imports shrank by 6.7 percent in March from a year earlier, worse than a 4.9 percent fall seen in the survey. This produced a $5.22 billion trade surplus, nearly doubling the amount in February, the Korea Customs Service data showed on Monday.

A continued slide in exports puts increasing pressure on policymakers to offer stimulus or shift to an easing stance as slowing global growth and the China-U.S. trade war slows Asia’s fourth largest economy.

“It would be difficult to see a significant improvement in exports, unless the sluggish semiconductor and China-bound exports are resolved,” said Park Sang-hyun, an economist at Hi Investment and Securities.

The trade data comes on top of a recent batch of weak indicators, such as February factory output that shrank to a two-year low, piling pressure on manufacturers across auto and petrochemical industries.

Bank of Korea Governor Lee Ju-yeol said last week the central bank may change its current neutral stance on monetary policy should “recovery sentiment” worsen significantly.

Analysts say the fall in exports was led by a slump in semiconductor business, the country’s key export, as well as cooling demand from China, its biggest market, amid the trade war with the United States, a Reuters poll showed on Wednesday.

The trade ministry is due to release a breakdown of trade data later on Monday.

Some of South Korea’s biggest exporters, including Samsung Electronics Co Ltd, have flagged concerns about earnings as chip prices fall and demand slows in China.

Reporting by Joori Roh, Cynthia Kim; Additional reporting by Yena Park; editing by Darren Schuettler