The South Korean economy in 1Q09 showed improving signals toward recovery with GDP growth of 0.1 percent QoQ, against a contraction of 5.1 percent in 4Q08. Their exports in April 2009 also rebounded with a contraction of only 19 percent, against the contraction of 22 percent in March 2009. Their Household Sentiment Index rose to 98 in April, over the record of 84 in March. Improvement in South Korea's Consumer Confidence Index and other economic figures added to signs that the economic slump might be abating with the help of their government's USD37 billion stimulus package and six interest rate cuts since October 2008 to 2 percent in February 2009 to cope with the economic crisis.
In addition, production improved in 1Q09, with a decelerating contraction of 3.2 percent QoQ, in line with expansion in their infrastructure activity of 8 percent, against a 1.6 percent contraction in 4Q08. Their construction sector grew 6.1 percent QoQ. Their service sector and private sector consumption also showed growth of 0.3 percent QoQ and 0.4 percent QoQ, respectively.
When compared YoY, it was found that the South Korean economy shank 4.3 percent YoY in 1Q09 due to slumping exports amid the global economic downturn that had dampened international market demand. In addition, their unemployment rate rose to 4 percent in March.
KASIKORN RESEARCH CENTER (KResearch) views that the impacts of the global economic crisis versus signals of economic recovery in South Korea will determine South Korean trade with Thailand in 2009. In 1Q09, bilateral trade between Thailand and South Korea totaled USD1,838.7 million, dropping more than 23 percent YoY. Thailand's exports to South Korea were valued at USD613.7 million, dropping around 25 percent YoY. Meanwhile, Thailand's imports from South Korea dropped 22.67 percent to USD1.225 billion. As a result, Thailand suffered a trade deficit of USD611.3 million, worsening from the 20.69 percent rate of deficit at USD770.8 million in 1Q08, because the value of the majority of Thailand's major exports to South Korea also dropped.
However, Thai exports of crude oil, machinery and machine parts to South Korea have shown satisfactory performance. Several Thai exports, i.e., computers, related equipment and parts plus iron, steel and related products showed slower contractions. Meanwhile, the majority of Thai imports from South Korea, such as raw materials and intermediate goods shrank. Nevertheless, some Thai import items from South Korea, such as machinery and parts, metal products and printed products, all accelerated on higher production demand in Thailand.
It is expected that bilateral trade between Thailand and South Korea in 2009 will continue to decelerate from 2008 because of the sluggish global economy continuing to crimp international markets. This less than happy outlook should continue throughout 2Q09. However, the improving economic situation in South Korea will help boost Thai exports over the remainder of the year, but this will depend on economic recoveries in major economies, such as the USA, EU, Japan and China. Should South Korea's economy recover quickly, many Thai exports should thrive there including integrated circuits, rubber, computers, parts and accessories; machinery and parts, paper and products, as well as electric appliances and parts.
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