South Korea's exports engine is sputtering out, as signaled by an increasing number of companies with slim profits and growing global trade protectionism, a report from a local economic research agency said Wednesday.
The report from the Korea Economic Research Institute (KERI) cited five signs to back up its argument, which also includes over-reliance on semiconductors for exports and a slowdown in the world economy.
Cited statistics said 464 companies in the country's 13 key exports industries, such as shipbuilding, automobiles, petrochemicals and display, are on the fringe, meaning they were unable to afford interest payments with their operational profits for three consecutive years. The number is an increase from 370 in 2015.
A breakdown of these companies showed 29 in machinery, 26 in automobile, 16 in textile and 10 in mobile communication equipment.
"If the number of such firms increases, deterioration in external factors can immediately lead to a fall in exports," KERI's report said.
The report also raised concerns over heavy dependence on chips for exports, which in the January-May period went up to 20.3 percent from 11.9 percent in 2015. According to Gartner, the market for memory chips is projected to contract in the coming years to minus 16.2 percent growth by 2020.
KERI said South Korea's export price competitiveness was weakening from the strengthening of its currency, the won, and the country can be further hurt by the U.S.-originated trade protectionism as well as prospects of financial crisis in emerging markets as the world's economy retreats.
"The fundamentals for our economy right now are not good, from the contraction in domestic demand and reduction in jobs," Yu Whan-ik of KERI's innovative growth department said. "If exports, our primary economic driver, suffer, the structural downing of the economy will be inevitable, and recovery will take considerable time." (yonhap)
Kim Chol-hoon firstname.lastname@example.org
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