"When Raw Material Import Prices Rise by 1%p... Trade Balance Worsens by 72 Million USD"

Q1 Trade Balance Estimated to Worsen by $4.23 Billion
"Need to Lower Import Raw Material Tariffs and Develop Overseas Resources"

[Asia Economy Reporter Jin-ho Kim] An analysis has been raised that if the import price of raw materials rises by 1 percentage point, the trade balance will deteriorate by 72 million dollars. This means that a significant portion of the trade deficit in the first quarter of this year is due to the import price of raw materials, pointing to the need to lower tariff rates on imported raw materials and strengthen overseas resource development.

The Korea Economic Research Institute (KERI) under the Federation of Korean Industries (FKI) argued this in a report titled "The Impact of Rising Raw Material Import Prices on the Trade Balance and Implications" on the 1st.

According to the report, the import price of raw materials surged by 58.5% in the first two months of this year. The cause was the further sharp rise in the import prices of crude oil and natural gas (LNG), which had been soaring, due to the Ukraine crisis. The import price increase rates for crude oil and natural gas in January and February were 68.1% and 69.2%, respectively. KERI predicted that the futures prices of crude oil and natural gas continued to surge in March and expected this trend to continue for the time being.

The problem is the impact of the rise in raw material import prices on the trade balance. According to the report, if the import price of raw materials rises by 1 percentage point, the trade balance deteriorates by 72 million dollars on a quarterly basis. KERI stated that assuming the raw material import price increase rate in the first quarter of this year is 58.5%, the trade balance would worsen by 4.23 billion dollars.

Accordingly, KERI pointed out that if the recent steep rise in raw material import prices continues, the trade deficit streak is inevitable. It also emphasized the need for policy support to ensure smooth supply of major imported raw materials.

Choo Kwang-ho, Director of Economic Policy at KERI, said, "The supply shortage of international raw materials is intensifying due to global supply chain instability and the Ukraine crisis," and argued, "It is necessary to lower tariff rates on major imported raw materials and to strengthen the stagnant overseas resource development again."

This content was produced with the assistance of AI translation services.