By Justine Irish D. Tabile, Reporter
PHILIPPINE EXPORTS to South Korea are expected to rebound in the second half of the year amid better economic and business conditions in Seoul, which have hindered the country from seeing increased trade under the free trade agreement (FTA).
Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort said that economic and political uncertainties in South Korea since December 2024 may have slowed down the country’s economic and business activities, including imports from the Philippines.
“The weaker South Korean currency (won) since late 2024 could have also made Philippine exports more expensive from South Korea’s point of view,” he said in a Viber message.
“This could also be a function of competition from other Association of Southeast Asian Nations (ASEAN) or Asian exporters such as Vietnam on exports such as bananas, among others,” he added.
Philippine Statistics Authority data showed Philippine exports to South Korea declined by 25.5% to $1 billion in the January-to-April period from $1.348 billion a year earlier. This despite the Philippine-South Korea FTA in effect for four months.
In April alone, the country exported $264.84 million worth of goods to South Korea, down 16.8% from $318.27 million in the previous year.
This made South Korea the country’s seventh-largest export market in April from being the country’s fifth-major trading partner in terms of exports in the same month last year.
“The FTA could have helped cushion the decline, at the very least, and could support future growth in Philippine exports after political and economic conditions already stabilized in South Korea recently,” Mr. Ricafort said.
“So yes, it can rebound in the second half due to better economic and business conditions in South Korea after the political and market turmoil a few months ago,” he added.
South Korea was plunged into a political crisis when then-President Yoon Suk Yeol declared martial law on Dec. 3, 2024. Earlier this month, a liberal party candidate, Lee Jae-myung, was elected president in snap elections and took office.
Meanwhile, Philippine Institute for Development Studies Senior Research Fellow John Paolo R. Rivera said that a “modest recovery” in Philippine exports to South Korea in the second half may be gradual.
“This can be realized if Philippine exporters will accelerate FTA utilization, target niche sectors like processed food and electronic components, and strengthen supply chain readiness,” he said in a Viber message.
“With supportive policies and improved market engagement, the FTA can still deliver long-term gains,” he added.
According to Mr. Rivera, the decline in Philippine exports to South Korea despite the FTA can be attributed to short-term adjustment lags, weak global demand, and product-specific issues.
“Electronics, a key export, has seen softening demand globally, while some sectors may not yet be fully utilizing the new tariff benefits under the agreement,” he said.
“FTAs don’t yield immediate results as they require time, market readiness, and strong private sector engagement. Philippine exporters may still be aligning supply chains, complying with rules of origin, and finding Korean buyers under the new terms,” he added.
To further benefit from the FTA, the Philippines should also strengthen its participation in the Regional Comprehensive Partnership and support micro, small, and medium enterprises in compliance and market access, Mr. Rivera said.
“With the right strategies, the FTA remains a valuable platform to diversify and deepen our economic ties with South Korea,” he added.
Entered into force last year, the Philippines-South Korea FTA is seen as critical in reducing the country’s tariff disadvantage against South Korea’s other FTA partners.
In particular, the Philippine government expects the FTA to help the Philippines recover its market share in South Korea’ banana imports after losing it to its ASEAN competitors, some of which already enjoy zero tariffs.
Aside from bananas, gains were also expected in Philippine exports of machinery and transport equipment and garments.
