Trade Deficit of $7.6 Billion from June 1-20... Uncertainty Continues in Second Half (Comprehensive)

[Asia Economy Sejong=Reporter Dongwoo Lee] Amid growing concerns of a global economic recession due to rapid worldwide inflation, abnormal signals are also being detected in domestic exports. Exports of major domestic items such as passenger cars and auto parts decreased by 3.4% compared to the same period last year from the beginning of this month to the 20th.

Some are worried that this year’s trade balance may turn into a deficit for the first time in 14 years since 2008 due to the triple high (high raw materials, exchange rates, and interest rates) phenomenon.

According to the Korea Customs Service on the 21st, the export amount (provisional customs clearance basis) from the 1st to the 20th of this month was $31.283 billion, down 3.4% from the same period last year. This is the first time in about four months since February 1-10 this year, which included the Lunar New Year holiday, that exports have decreased compared to last year.

The number of working days during this period was 13.5 days, two days fewer than the same period last year (15.5 days). However, the average daily export amount increased by 11.0% considering this.

Among major export items, semiconductors (1.9%) and petroleum products (88.3%) increased, while passenger cars (-23.5%), auto parts (-14.7%), and wireless communication devices (-23.5%) decreased. Exports to Taiwan (16.5%) and Singapore (54.9%) increased during the same period, but exports to major countries such as China (-6.8%), the United States (-2.1%), the European Union (-5.3%), and Vietnam (-4.7%) decreased due to worsening external trade conditions such as China’s lockdown measures.

Imports from the 1st to the 20th of this month amounted to $38.9 billion, up 21.1% from a year earlier.

Imports of crude oil (63.8%), semiconductors (40.2%), and petroleum products (24.5%) increased, but imports of semiconductor manufacturing equipment (-6.5%) and passenger cars (-34.8%) decreased. By country, imports from China (23.4%), the United States (13.3%), and Japan (1.9%) increased, while imports from the EU (-3.3%) and Russia (-44.1%) decreased.

The sharp increase in total imports is due to the prolonged Ukraine crisis, which caused energy prices to surge. In particular, the combined import amount of the three major energy sources?crude oil ($6.06 billion), coal ($1.698 billion), and gas ($1.557 billion)?reached $9.261 billion, soaring 67.5% compared to the same period last year ($5.528 billion). Coal imports set a record high last month.

During this period, exports decreased and imports increased, resulting in a trade deficit of $7.642 billion. The cumulative trade deficit for this year also reached $15.469 billion. If this situation continues, the overall trade balance for June is likely to record a deficit. If the June trade balance records a deficit, it will mark three consecutive months of deficits this year.

The problem is that the trade deficit trend may continue in the second half of this year. This is due to the global economic recession caused by rapid worldwide inflation and the surge in grain prices due to international food protectionism amid the prolonged Russia-Ukraine war.

According to the '2022 First Half Export-Import Evaluation and Second Half Outlook' report published by the Korea International Trade Association’s International Trade and Commerce Research Institute, the trade deficit this year is expected to be $14.7 billion. Exports are predicted to increase by 9.2% to $703.9 billion, but imports are expected to rise by 16.8% to $718.5 billion.

The report diagnosed that energy import costs, exceeding $100 per barrel, are a burden on the trade balance. Imports of the four major energy sources (crude oil, natural gas, petroleum products, and coal) increased by 86.1% compared to the same period last year until May this year. Among them, coal imports increased by 169.1%. The prolonged Russian invasion of Ukraine is analyzed to have a negative impact by increasing energy costs.

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