Pakistan-South Korea exports set to surge 307% to $757mn under FTA

February 07, 2025 (MLN): Exports to South Korea are projected to grow from $186 million in 2023 to $757mn, reflecting an impressive increase of 307% over the next six years, as a result of the Free Trade Agreement (FTA) with South Korea.

Meanwhile, imports from South Korea are expected to rise from $821mn to $1.4 billion, marking a 71.38% increase, according to the feasibility study for Pakistan’s FTA/Comprehensive Economic Partnership Agreement (CEPA) with the Republic of Korea by Policy Research & Advisory Council (PRAC).

Total trade volume with South Korea is expected to more than double, increasing by 115% to reach $2.16bn, reflecting deeper economic ties and enhanced trade integration.

Moreover, the real GDP of Pakistan is projected to increase by $65mn, equivalent to a marginal growth rate of 0.017%, suggesting limited spillover benefits to the broader economy.

Exports to the world are expected to grow by $279.91mn (0.97%), reaching $29.23bn, while imports from the world increase by $694.46mn (1.38%), totaling $51bn.

Furthermore, the global trade deficit is projected to expand modestly by $9mn (1.94%), reflecting increased import dependency and trade diversion.

These projections are based on simulations conducted using the GTAP model.

The analysis highlights substantial growth in exports to South Korea and a significant increase in bilateral trade volume.

However, the broader macroeconomic benefits, such as GDP growth, remain limited.

While trade integration improved, the widening of trade deficits both with South Korea and globally underscores the need for targeted policy interventions to maximize the FTA's potential.

The post-FTA projections indicate a significant increase in trade with South Korea, with notable growth in exports and imports.

While the trade balance with South Korea is expected to deteriorate, the overall trade volume will see a large expansion.

The economic impact on Pakistan's GDP is modest, and global trade is expected to show improvement.

These projections highlight the potential for stronger bilateral ties with South Korea and the broader trade environment post-FTA.

This feasibility study examines the potential for the FTA/CEPA between Pakistan and the Republic of Korea to address Pakistan’s substantial trade deficit of $1.07bn with South Korea.

This analyzes bilateral trade dynamics, identifies strategic sectors for collaboration, and evaluates the potential for long-term economic growth through such an agreement.

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