Weak South Korea's chip exports sounded the alarm or supported the central bank to speed up the pace of interest rate cuts

The Zhitong Finance App learned that an analysis by Bloomberg Economics showed that South Korea's actual chip exports declined in the last quarter, posing a risk to the country's economic growth prospects. Economist Hyosung Kwon said in the report that after price changes were adjusted, South Korea's semiconductor exports fell 7.6% and 7.5% year-on-year in August and September, respectively, dragging down the overall data for the third quarter by 5.3%. The analysis also supports the view that the Bank of Korea may speed up the interest rate cut cycle next year.

Global demand for Korean technology products, including memory chips, is strong, so even if the country's consumption declines, demand for technology products has helped the Korean economy maintain steady growth in recent quarters. A weakening export contribution to the economy could cast a shadow over the country's economic growth prospects and prompt calls for measures to protect the growth momentum.

Last week, the Bank of Korea cut the benchmark interest rate by 25 basis points to 3.25% against the backdrop of South Korea's inflation and cooling real estate prices. Economist Hyosung Kwon believes that a shift in chip trends may be one of the factors behind this decision. However, Bank of Korea Governor Rhee Chang-yong (Rhee Chang-yong) opposed the need to speed up the pace of interest rate cuts.

Real exports are a key component of gross domestic product (GDP), and the Bank of Korea expects GDP to grow by 2.4% this year. In nominal terms, chips have always been the biggest driving force for overall exports. Driven by global demand for the development of artificial intelligence, chip exports are very strong.

Citigroup economists Jin-Wook Kim and Jiuk Choi said in a report earlier this week that South Korea's “net export contribution may be very weak” in the third quarter, “falling short of expected economic growth data or increasing the possibility that the interest rate cut cycle will start early.”

The Bank of Korea will announce the GDP growth rate forecast for the third quarter on the 24th. There are signs that the memory chip boom may be cooling down. According to data from Korea's Ministry of Trade, South Korea's semiconductor export growth has been slowing for 5 consecutive months. Another data from the Bank of Korea shows that the price increase in memory chip exports also slowed down last month.