Korea Trade Surplus Beats Forecast

South Korea had a larger-than-expected $3.79 billion trade surplus in October, helped by brisk exports of information-technology products and rising demand from emerging markets including China, the Ministry of Knowledge Economy said Sunday. 

The government says it now expects that monthly exports and imports will begin to grow in November, partly helped by the low base from the year-earlier periods. 

This projection is a come-down from its previous one, as it had said a month earlier that exports and imports would grow at the beginning of the fourth quarter, in October. But the government still points to a faster-than-expected recovery of domestic and global demand. 

South Korea is one of the first economies in the region to report trade data, and thus provides a gauge to market watchers in assessing global demand. 

According to the preliminary data, exports in October fell 8.3% from a year earlier at $34.03 billion, less than the 12% decline projected by market watchers, while imports were down 16.3% at $30.23 billion, versus a forecast for a 15.7% decline. 

The trade balance was in the black for a ninth straight month, with the surplus for the January-October period totaling $34.58 billion, the biggest on record, followed by a $31.9 billion surplus in the first 10 months of 1998. 

In September, Korean exports and imports fell 7.8% and 24.6% respectively, for a $4.7 billion surplus. 

The latest data are expected to fuel growing optimism that South Korea will be one of the countries that weathers the severe global economic downturn better than expected this year. 

Such optimism was recently backed up by the government, which now sees possibilities for gross domestic product to expand this year, since South Korea's production and exports are doing far better than when it had expected GDP to contract 1.5% this year.

According to recent production data, industrial output jumped 11% in September from a year earlier, the fastest pace in 20 months. 

A majority of analysts still believe the Bank of Korea won't start to raise rates from an all-time low of 2% before early next year, due partly to the opposition from the government, which is warning that a hasty rate increase will hurt the nascent recovery. Still, experts say the firm economic indicators announced recently are more than enough to sway the central bank to adjust its policy rate. 

During October, the average volume of daily exports was $1.48 billion, the highest level since October 2008, and that of imports reached $1.3 billion level for the first time in a year, the ministry said. 

Liquid-crystal-display devices and semiconductors continued to lead the way in exports, by rising 38.8% and 36.8% respectively from a year earlier during the first 20 days of October. 

Exports to China, South Korea's biggest export destination, rose 3.4% from a year earlier in the first 20 days of the month, while those to the Association of Southeast Asian Nations jumped 9.0% in the same period, marking the first rise this year. 

Compared with the first 20 days of October 2008, shipments to developed nations were weaker, with exports to the U.S. down 37.4%, due partly to shipment of fewer cars. Shipments to the European Union were off 19.0% and those to Japan were 22.5% lower. 

"A decline in imports of oil and raw material eased significantly, while imports of consumption goods turned to a growth for the first time this year," contributing to a fast recovery of imports, the ministry said. 

An improvement in imports means better domestic and global demand as they lead to more production inside the nation and exports later. The government now expects to chalk up a record-high trade surplus of more than $40 billion this year.