67 Years of Korea's Trade History: First 'Export $700 Billion' Forecast... "Trade Balance Deficit for the First Time in 14 Years"

Report from Korea International Trade Association on the 21st

First '700 Billion Dollar' Forecast in 67 Years of Korean Trade History

High Oil Prices Due to Prolonged Russia-Ukraine Conflict... "Trade Deficit"

[Image source=Yonhap News]

[Asia Economy Reporter Moon Chaeseok] South Korea is expected to surpass $700 billion in annual exports (approximately 902 trillion KRW) for the first time in 67 years since the first trade statistics were compiled in 1956. However, due to the prolonged Russia-Ukraine conflict causing a surge in oil prices, imports are expected to exceed exports, leading to a trade deficit for the first time in 14 years, making the situation less than favorable.

On the 22nd, the Korea International Trade Association’s Institute for International Trade and Commerce released a report titled "Evaluation of Exports and Imports in the First Half of 2022 and Outlook for the Second Half," forecasting this outcome. The association expects South Korea’s exports this year to reach $703.9 billion (approximately 907 trillion KRW), a 9.2% increase from last year, driven by strong performance in semiconductors and petroleum products.

Semiconductor exports are projected to maintain a robust growth rate of 10.2%, supported by steady foundry (semiconductor contract manufacturing) demand. Exports of petroleum products (50.5%) and petrochemicals (9.6%) are also expected to surge sharply due to increased volume and rising unit prices. Despite production disruptions caused by semiconductor supply shortages and logistics difficulties, automobile exports (11.1%) are anticipated to grow in value as the share of high-priced electric vehicles increases.

However, ship exports (-21.9%) are expected to perform poorly as orders sharply declined after the COVID-19 pandemic in 2020, leading to a reduced volume of deliveries scheduled for this year. Particularly significant is the potential delay in delivering liquefied natural gas storage and transshipment vessels (LNG·FSU) originally intended for export to Russia. Steel exports (6%) are forecasted to sharply decline (-12.2%) in the second half of the year due to some price adjustments since the latter half of last year and the conversion of some export volumes to domestic sales caused by domestic supply shortages.

Imports this year are expected to increase by 16.8% from the previous year to $718.5 billion (approximately 926 trillion KRW), surpassing export values. Consequently, the Korea International Trade Association anticipates a trade deficit of $14.7 billion (approximately 19 trillion KRW). The surge in imports is largely attributed to rising oil prices. The association projects that international oil prices will remain above $100 per barrel in the second half, further increasing import costs. Until last year, South Korea had maintained a trade surplus for 13 consecutive years.

From January to May this year, imports of the four major energy sources?crude oil, natural gas, coal, and petroleum products?accounted for more than one-quarter (27.6%) of total imports. If the Russia-Ukraine conflict prolongs and crude oil procurement prices continue to rise, the trade deficit caused by increased imports is expected to worsen in the second half. However, with OPEC+ recently deciding to increase production and concerns over a global economic slowdown potentially lowering oil prices, the trade deficit in the second half (-$3.3 billion, approximately 4.25 trillion KRW) is expected to be smaller than in the first half (-$11.4 billion, approximately 14.7 trillion KRW). On the 20th (local time), Brent crude oil from the North Sea closed at $114.13 per barrel, up $1.01 (0.9%) from the previous trading day, while West Texas Intermediate (WTI) crude oil closed at $110.71 per barrel.

Cho Sanghyun, head of the Korea International Trade Association’s Institute for International Trade and Commerce, stated, "Despite difficult conditions, South Korea’s exports are navigating toward record highs this year, but the global environment in the second half remains challenging. With the ongoing 'three highs' phenomenon?high raw material prices, exchange rates, and interest rates?the profitability of export manufacturing companies is rapidly deteriorating. Therefore, strategic policy support is necessary to enhance the price competitiveness of our companies and to promote the localization of import supply chains."

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