South Korea's November exports to fall for 12th month

GLOBAL ECONOMY - SEOUL. South Korea's exports likely saw another month of double-digit contraction in November, with few signs of recovery in semiconductors and Chinese demand, though the Bank of Korea is forecast to keep its key interest rate unchanged at its last meeting of the year, a Reuters poll showed on Wednesday.

November shipments were expected to fall 10.2% from a year earlier, their 12th straight month of decline, after slumping 14.8% in October, according to the median forecast of 10 economists polled.

Imports were forecast to drop 11.9%, following a 14.6% drop the previous month.

"The sixth straight month of double-digit (export) declines on-year could disappoint the market, which had expected a significant improvement based on base effects," said Lee Sang-jae, chief economist at Eugene Investment.

Economists have predicted year-on-year comparisons would start to moderate soon due to the calendar effect, unless global demand worsens. South Korean exports started falling in November last year.

"It is still too early to tell if exports are bottoming out given the uncertainty over the U.S.-China trade war," said Defa Zhao, economist at Continuum Economics, but added South Korea would be "one of the key beneficiaries" if the two reach the 'phase one' trade deal.

South Korea's export-reliant economy has been among the hardest hit by the prolonged U.S.-China tariff war and cooling global demand. It grew 1.9% in the first half from a year earlier and global investment banks predict full-year growth will fall to as low as 1.7% from 2.7% last year.

Economists also predicted South Korea's consumer price inflation rate would rise to a median 0.5% in November on-year, after flatlining at zero in October and sliding 0.4% a month earlier.

The Reuters poll also sees industrial output in October, due at 8 a.m. on Friday (2300 GMT Thursday), rising by a seasonally adjusted 0.1% from a month earlier, weakening from a 2.0% rise the previous month.

October trade data will be published at 9 a.m. on Sunday, while inflation figures are expected at 8 a.m. on Monday.

BOK TO WAIT-AND-SEE

In a separate poll, all 19 economists predicted the Bank of Korea would keep its policy interest rate unchanged at its last meeting of the year on Friday.

In October, the central bank cut its policy interest rate for the second time in three months to 1.25%, matching a record low seen until late 2017, to support the faltering economy.

"The BOK would likely maintain its recent neutral stance to wait-and-see the effect of two rate cuts, as the U.S.-China trade dispute is turning to a rather positive mood, while some forward-looking indicators signalled improvement," said Kim Sang-hun, fixed-income analyst at Hi Investment and Securities.

The BOK in its statement on the October policy decision said it "will judge whether to adjust the degree of monetary policy accommodation, while observing ... the effects of the two base rate cuts."

But 10 of 19 economists see a third cut coming next year, with 8 expecting it before the first half ends.

"The BOK will still have room left for another cut given the grave economic situation and falling inflation," said Moon Hong-cheol, an analyst at DB Financial Investment, who expects the next cut in the first quarter of 2020.

The BOK will also announce its revised economic outlook for this year and next year later on Friday.

The bank's latest growth projection for this year and next year is 2.2% and 2.5%, respectively.