South Korea’s export growth accelerated last month, in a sign the economy can sustain its momentum after a faster-than-expected expansion last quarter.

Shipments that reflect working-day differences increased 11.3 per cent from a year earlier, according to data released on Wednesday (May 1) by the customs office. Without the adjustment, headline exports rose 13.8 per cent while overall imports increased 5.4 per cent. The trade surplus came to US$1.5 billion.

South Korea is a major player in international trade and demand for its goods has been recovering since late last year. The nation’s economy expanded 1.3 per cent in the first quarter, a pace faster than the most optimistic estimates, with exports driving the momentum.

Semiconductor sales have been resurgent even as Middle East tensions persist and global interest rates stay elevated, pressuring consumption. Top companies including SK Hynix and Samsung Electronics, have reported better-than-expected earnings as demand for the memory chips that power modern electronics and artificial intelligence rebounds from last year’s downturn.

“Export growth will likely remain the main driver of growth this quarter amid the strong demand for semiconductors,” Dave Chia, an associate economist at Moody’s Analytics, said in a note before the trade figures. “Export growth will likely remain the main driver of growth this quarter.”

South Korean exporters have benefited in particular from strong demand in major economies including the US. The International Monetary Fund said last month that advanced economies would likely see a pickup in their growth this year compared with 2023, while emerging and developing markets experience a modest slowdown.

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“Recent data suggest the strength in Asian exports may still have some way to go,” Sheana Yue, an Oxford Economics economist, said. “The chip upcycle should keep exports of advanced semiconductors and associated manufacturing equipment elevated. But we maintain our caution about the general outlook for external demand.”

A key source of concern for policymakers is the sliding value of the won against the dollar. While companies such as Hyundai Motor have beat earnings forecasts partly on the back of a weaker local currency, smaller companies and importers are struggling to cope with higher costs of raw materials and energy.

The outlook for demand from China is also a source of anxiety. The world’s second-largest economy is struggling to emerge from a domestic slump in spending, with a surprise decline in industrial profits in March underscoring the risks. 

Shipments to China totaled US$10.5 billion in April, an increase of 9.9 per cent from a year earlier. Meanwhile, exports to the US amounted to US$11.4 billion, a 24 per cent rise, according to the trade ministry. The trend in which growth in exports to the US outpaced gains in shipments to China continued for a third consecutive month.

South Korea has to navigate geopolitical risks. Some of its manufacturers manage production bases in China that face pressure as Washington ratchets up its export controls on Beijing to stem a flow of inexpensive goods perceived to be flooding the US market. BLOOMBERG