Shrinking exports are causing concern in Korea. The ministry of commerce, industry, and energy recently announced that in April, exports not only shrunk for two months in succession compared with the same period last year. Meanwhile, business is in recession and prices are rising steeply.

Letters of credit (L/Cs) point to even more worrying times ahead. The number of L/Cs opened for the purchase of Korean over the next few months is falling, suggesting that exports will not rally in the short term. Further portents of trouble ahead is that raw material imports used by Korean manufacturers to make goods for export are falling as are levels of capital investment in plant and machinery.

Stagnant US and Japanese economies to blame

The prognosis is that the Korean economy is cooling too rapidly. One of the main reasons for this is the stagnant economies of the US and Japan. Korea writes significant amounts of export business with Japanese and US companies, including many in the technology sectors that have been most affected by the global economic slowdown.

Korea has seen exports of computers and semiconductors fall by around one-third. Even in the old economy sectors such as steel, shipbuilding and textiles, exports are shrinking.

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