SEOUL—South Korea on Wednesday posted a shock 6.6 percent annual drop in exports for January and saw new export orders fall for a sixth consecutive month as the euro zone crisis and holidays hit, commencing a major election year on a gloomy note.
Inflation in January eased more than expected to a 1-year low of 3.4 percent on drops in fresh food prices, but looked poised to stay elevated on high oil prices and anticipated hikes in public utility charges, leaving the central bank with little room to ease policy to support the slowing economy.
Economists said the authorities, already known for their policy of keeping the won cheap, could try to bring the currency down to support exporters but added the impact of any such efforts were likely to be limited.
“The won is expected to appreciate modestly, which will not seriously hurt the price competitiveness of exports,” said Lee Sung-kwon, chief economist at Shinhan Investment Corporation, referring to expectations that weakness in the U.S. dollar would continue to prop up emerging market currencies.
Exports fell year-on-year for the first time since October 2009, with sharp declines in shipments to debt-stricken Europe as the continent slides toward recession. The drop was more than the worst forecast from a poll of 11 analysts and compared with the median expectation for a 0.7 percent gain. The consumer price index rose less than a 3.6 percent median forecast from the poll.