S.Korea exports likely to extend slump in January, inflation to ease

South Korea's exports are likely to have extended their slump in January, while inflation is seen likely to have cooled on falling global oil prices. Global economy which shows little sign of improvement is likely to keep S.Korea's exports subdued. Reuters survey showed the decline in shipments was expected to continue for a 13th straight month, down 10.8 pct year-on-year in January. This would be slightly less severe than the 14.1 percent drop in December but still bad for the ongoing recovery.

"A double-digit percentage fall looks inevitable as there is one less working day in January from last year while falling oil prices will also drag down trade costs," said Stephen Lee, senior economist at Samsung Securities in Seoul. The same poll forecast imports would drop by 15.1 percent on-year in January.

S.Korea's January inflation is expected to ease to 0.9 percent from 1.3 percent in December as the effect from a cigarette price hike last year is set to dissipate while a recent cut on city gas prices will also reduce price pressures. 

"This year inflation will be stabilised at a low level from falling global commodity prices and sluggish domestic demand and likely to come to 1.4 percent at year-end, per the central bank's forecast," said Lee Sang-jae, chief economist at Eugene Investment & Securities.

The Bank of Korea forecasts inflation at 1.4 pct in 2016 and 2.0 percent in 2017. The central bank's inflation target for 2016-2018 is 2 percent. BoK expects inflation to rise this year, but the pace will be very slow and the target is unlikely to be achieved in 2016.