Economic Analysis - Positive Semiconductor Outlook To Cap Export Weakness - APR 2017

BMI View: The strong pick up in South Korea's exports and industrial production in Q416 is unlikely to be sustained over the coming quarters as China's economy continues to slow and global trade uncertainties remain. However, excessive weakness will likely be capped as rising semiconductor prices lend support to exports and investment. As such, we maintain our 2017 real GDP growth forecast of 2.6%.

In our view, South Korea's strong Q416 export and manufacturing production figures are reflective of stronger year-end demand and are unlikely to be sustained over the coming quarters. This is amid our expectations for a continued slowdown in the Chinese economy and a rise in global uncertainties following a possible rise in trade protectionism on the part of the Trump administration. However, we expect South Korea's electronics industry to lend support to the economy as key electronic companies such as Samsung and SK Hynix continue to invest in the next generation of semiconductors. Rising semiconductor prices will also limit excessive export weakness. As such, we maintain our 2017 real GDP forecast of 2.6%.

Export Rebound Unlikely To Last

Pick Up Not Sustainable
South Korea - Exports & Manufacturing Production, % chg y-o-y
BMI, Bloomberg

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