(Bloomberg) -- South Korea’s chip exports dropped in real terms last quarter, posing a risk to the nation’s economic growth outlook, according to a Bloomberg Economics analysis that lends support to views that the central bank may accelerate its interest rate-cutting cycle next year.
Semiconductor exports fell 7.6% and 7.5% from a year earlier in August and September, after adjustment for price changes, dragging down the overall third quarter figures by 5.3%, according to a report by BE economist Hyosung Kwon.
Strong global demand for South Korea’s technology products, including memory chips, helped the economy cruise along in recent quarters even as consumption faltered. If exports sputter as a contributor to the economy, it may cloud the outlook for growth and spur calls for steps to safeguard economic momentum.
Last week, the Bank of Korea cut its benchmark rate by a quarter-percentage point to 3.25% on the back of cooling inflation and property prices. Kwon argues that the shift in the chip trend may have been among the factors behind the decision. Still, Governor Rhee Chang-yong has pushed back against the need for a faster pace of rate cuts.
Real exports are a key component of gross domestic product, which the BOK expects to expand 2.4% this year. In nominal terms, chips have been the biggest driver for overall exports, rallying on the back of global demand for artificial intelligence development.
“Net exports contribution is likely to be weak” for the third quarter, Citi Research economists Jin-Wook Kim and Jiuk Choi said in a note earlier this week. “Weaker-than-expected economic growth data could raise the odds for the front-loading of rate cutting cycle.”
The BOK plans to release its estimate of 3Q GDP growth on Oct. 24.
Signs have already emerged that the memory-chip boom may be easing. Growth in South Korea’s semiconductor exports has been moderating for five months, according to trade ministry data. Price gains for memory-chip exports also slowed last month, according to separate BOK figures.
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