South Korea exports set to grow at strongest pace in nearly 5 decades: Reuters poll

Thailand’s manufacturing sector experienced a contraction in May, with factory output declining by 0.8 percent year-over-year, according to data released by the country’s Industry Ministry. This figure fell below analysts’ expectations, which had predicted a decline of just 0.34 percent. The drop follows a revised contraction of 0.94 percent in April, indicating a continued slowdown in industrial activity.

The decline in factory output was attributed to multiple factors, including a significant reduction in automotive production and rising inflationary pressures. According to the Federation of Thai Industries, car production plummeted by 17.94 percent in May compared to the same period last year. This sharp decline in the automotive sector, a key component of Thailand’s manufacturing base, contributed significantly to the overall downturn. Additionally, ongoing geopolitical tensions have impacted energy costs, transportation networks, and the availability of imported raw materials, all of which have increased manufacturing and logistics expenses.

Despite these challenges, the government has implemented stimulus measures aimed at boosting domestic demand and supporting industries affected by external shocks. These efforts, combined with stronger export performance, helped mitigate the impact of the downturn. However, the overall trend remains concerning given the broader economic implications of reduced industrial output.

Looking ahead, the Industry Ministry has projected a modest recovery for the year, forecasting a growth range of 1.0 to 2.0 percent in factory output. This projection comes amid a backdrop of cautious optimism, particularly following recent decisions by the central bank. Earlier this month, the Bank of Thailand maintained its key interest rate but raised its economic growth forecast for 2026 to 2.3 percent. The central bank also anticipates a 14 percent increase in exports, signaling confidence in the resilience of Thailand’s export-oriented economy despite current headwinds.

Meanwhile, neighboring South Korea is experiencing a surge in exports, with preliminary data suggesting the strongest annual growth in nearly five decades. A Reuters poll indicated that South Korean exports are expected to rise by 61.0 percent in June compared to the same period last year, surpassing the 53.4 percent growth recorded in May. If confirmed, this would represent the highest growth rate since October 1978. The robust export performance has been largely driven by the semiconductor industry, where companies such as Samsung Electronics and SK Hynix have benefited from rising chip prices fueled by global demand for artificial intelligence technologies.

Semiconductor shipments alone saw a staggering increase of 188.4 percent in the first 20 days of June, contributing to a significant portion of total exports. With semiconductors accounting for 41.2 percent of total exports, the sector is playing a pivotal role in South Korea’s economic rebound. Analysts suggest that the momentum in chip exports is likely to persist due to sustained high demand for memory chips and increasing token usage in major language models worldwide.

Economists predict that the export boom will extend beyond semiconductors, with a potential boost to non-chip product exports as global markets recover from fluctuating oil prices. In addition to the export success, South Korea is preparing to announce three large-scale infrastructure projects designed to drive future economic growth. Among these initiatives is a new semiconductor manufacturing hub in the southwest region, which is anticipated to attract substantial investments from Samsung and SK Hynix over the coming years.

As South Korea prepares to release its official trade figures for June, the nation stands at a critical juncture in its economic trajectory. While the export-driven growth offers promising prospects, it also brings challenges related to rising import volumes and inflationary pressures. Consumer price increases are expected to reach 3.2 percent annually, marking the fastest rise since late 2023. These developments underscore the complex interplay between global market dynamics and national economic strategies in both Thailand and South Korea.