South Korea’s exports expanded at their fastest pace in 26 months

South Korea’s exports expanded at its fastest pace in 26 months in December, on robust chip demand and improved global orders, providing additional signals that the recovery is on track despite resurgence in the novel coronavirus.

Exports in the final month of 2020 grew 12.6% year-on-year, the sharpest growth since October 2018 when it grew 22.5%, government data showed on Friday.

The rate of growth was sharply higher than forecast as analysts had expected a 5.6% jump from a year earlier, and was much faster than a 4.1% growth in November.

“Semiconductor exports were exceptionally strong, with 11 of 15 major export items posting growth ... sales of IT products boosted the overall growth,” a trade ministry official told Reuters.

South Korea’s monthly trade data, the first to be released among major exporting economies, is considered a bellwether for global trade.

Overseas sales of semiconductors surged 30% from a year earlier, marking the sharpest expansion since August 2018, towing the overall exports recovery.

Other major items such as mobile devices, displays and computers also soared 39.8%, 28.0% and 14.7% year-on-year.

By destination, exports to China, South Korea’s biggest trading partner, gained 3.3% from a year ago, and those to the United States and European Union jumped 11.6% and 26.4%.

Imports rose 1.8%, reversing a 1.9% decline in November and marking the best reading since April 2019. Reuters’ poll had expected a 2.6% decline.

Meanwhile, for the whole of 2020, South Korea’s exports slid 5.4% as the coronavirus pandemic swept world trade, but that was much better than a 10.4% fall in 2019, the worst in a decade and the third-worst in the country’s modern history.

South Korea’s financial markets are closed on Friday for the New Year’s Day holiday and will resume trade on Monday.

South Korea unveiled a fresh 9.3 trillion won ($8.49 billion) package on Tuesday to support small businesses hit by a third wave of coronavirus and those vulnerable to unemployment due to the outbreak.

Of the total package, 5.6 trillion won will be used to fund cash handouts to coronavirus-struck small businesses, temporary or freelance workers and taxi drivers affected by the prolonged pandemic, the finance ministry said.

Some 2.9 trillion won will be used to support small and medium-sized businesses including ski resorts and hotels, which received damage from the government’s year-end special COVID-19 regulations, and to keep more Koreans in jobs.

The South Korean government has added new restrictions this week such as banning on gatherings of more than four people and suspending ski resorts and tourist sports, aimed at stopping the virus spread during Christmas and New Year holidays.

Another 0.8 trillion won is aimed at strengthening the public health system.

The ministry said the cash handouts will be offered starting from Jan. 11, and expects that the latest measures could help around a total 5.8 million people.

On Monday, the country vowed to speed up efforts to launch a coronavirus vaccination programme as it continued to report near-record daily cases and discovered its first cases of the coronavirus variant linked to Britain.

Meanwhile, the $8.5 billion package will be funded by the finance ministry’s reserve fund, leftover budget for the year as well as 2021 budget, the ministry said in a statement.

Meanwhile, Iraq agreed a $2.625 billion deal with South Korea’s Daewoo Engineering & Construction (047040.KS) on Wednesday to build the first phase at its planned Faw commodities port in the south of the country.

Under the contract, signed in Baghdad by representatives of Iraq’s transportation ministry and the South Korean company, Daewoo E&C will handle construction work including building five berths to unload ships and a yard for containers.

Daweoo will also carry out dredging and drilling works to create an access navigation channel, Farhan al-Fartousi, Iraq’s director general at the General Company for Ports, told Reuters on the sidelines of a signing ceremony at the transportation ministry headquarters.

The first phase should allow the port to receive three million containers, and all the construction work should be finished in around four years, said Fartousi.

For now, to receive commodities ships, Iraq has to rely mainly on the port of Umm Qasr in the south, which sits at the top of the strategic Gulf waterway.

The port of Faw will be deeper, allowing it to receive the largest container ships.