South Korea's Economic Recovery Threatened by Semiconductor and Oil Prices

Strategic Insights -

South Korea's economic recovery, heavily reliant on exports, may be derailed by a sharp decline in semiconductor prices and skyrocketing oil costs. The price of a 256-megabyte DDR DRAM chip has fallen to $2.84, down 22.6% from the end of last year, while oil prices have surged 23.9% year-on-year to $42.83 per barrel, far exceeding the central bank's forecasts. This economic pressure comes as the country's exports, which make up the largest portion of its total exports, have grown only 16.7% last month from a year earlier.

Key Takeaways:

  • The price of a 256-megabyte DDR DRAM chip has fallen to $2.84, a 22.6% decline from the end of last year, exceeding the central bank's forecast of a 30% decrease from 2004.
  • Semiconductor exports, the largest portion of South Korea's total exports, grew only 16.7% in February from a year earlier.
  • South Korea's economic growth fell to 4.6% in the third quarter, down from 5.5% in the previous three months, and is expected to fall to 4% in 2005.
  • The country imports 80% of its oil from Dubai, which has seen a 23.9% year-on-year price increase to $42.83 per barrel.
  • South Korea is the world's fourth-largest oil importer and has seen its economic growth slowed by oil price increases and weak domestic demand since 2002.
  • The decline in semiconductor prices and oil costs threatens to undermine the country's economic recovery, which has been heavily reliant on exports.

Statistics:

  • $2.84: the current price of a 256-megabyte DDR DRAM chip. (22.6% decline from the end of last year)
  • 16.7%: the growth rate of semiconductor exports in February from a year earlier
  • $42.83: the current price of Dubai crude oil per barrel, a 23.9% year-on-year increase
  • 4.6%: the economic growth rate in the third quarter, down from 5.5% in the previous three months
  • 4%: the expected economic growth rate in 2005

Sources:

  • Asia Pulse
  • Yonhap