SOUTH KOREAN exports fell unexpectedly in May while inflation cooled, reinforcing expectations that the country’s central bank will cut interest rates again in coming months to shore up economic growth.

    South Korea is the world’s first major exporting economy to report monthly trade figures, providing an early glimpse of the strength of the global demand.

    Exports fell 6 percent year on year to US$39.8 billion while imports dropped 9.3 percent to US$32.7 billion, data from the Ministry of Trade, Industry and Energy showed yesterday, resulting in a US$7.1 billion trade surplus.

    Though the May export drop defied market expectations for a 1.6 percent rise, shipments fell at the slowest pace since November 2015, while average exports per working day stood at their highest this year at US$1.85 billion, the trade ministry said, offering some hope that the country’s long trade slump may be slowly bottoming out.

    Imports were also worse than the 7.7 percent decline expected by economists, but the drop was the slowest since December 2014.

    Exports and imports fell 11.2 percent and 14.9 percent respectively in April.

    “Trade seems to have hit bottom but it’s hard to say we’re on a sharp rebound. It’s better than last month, but still weaker than we expected. Any improvement will likely be gradual,” said Moon Jung-hui, an economist at KB Investment & Securities in Seoul. “In light of all the data today, I see one rate cut in July.”

    Minutes from the Bank of Korea’s May policy meeting late Tuesday showed central bank officials saying exports likely bottomed out in January and February as global demand improved.

    But the economy is still wobbly, with May inflation pulling further away from the central bank’s 2 percent target, giving the Bank of Korea room to cut rates again if needed.

    Annual inflation in May cooled more than expected to a four-month low of 0.8 percent, down from a 1 percent increase in April, mainly due to low energy costs but also a sign of sluggish domestic demand.

    The central bank is already under pressure from the market and media to lower borrowing costs to aid an overhaul of the country’s giant but ailing shipping and shipbuilding sectors.

    But analysts say any rate cuts will have to come soon as an expected rate hike by the U.S. Federal Reserve this summer could spur capital outflows from emerging markets and leave the Bank of Korea with less room to maneuver.

    The country’s 7-day repurchase agreement rate currently stands at a record low of 1.50 percent after the Bank of Korea cut it four times between 2014 and June last year. (SD-Agencies)