Five Consecutive Months of Trade Deficit in 14 Years 'Warning Sign'

On the 7th, trucks are parked at the Inland Container Depot (ICD) in Uiwang-si, Gyeonggi Province, as the Cargo Solidarity Union launched a general strike demanding the abolition of the safety freight sunset system and an increase in transportation fees due to high oil prices. Photo by Moon Honam munonam@

[Asia Economy Sejong=Reporter Dongwoo Lee] This year, the trade deficit exceeded $25 billion, marking the largest deficit since trade statistics began in 1956, raising concerns that this trend may continue throughout the second half of the year.

According to the Korea Customs Service and the Ministry of Trade, Industry and Energy on the 27th, exports from the 1st to the 20th of this month (provisional customs clearance basis) amounted to $33.424 billion, a 3.9% increase compared to the same period last year. This is the smallest growth rate since November 2020 (3.4%). During the same period, imports increased by 22.1% year-on-year to $43.641 billion. This resulted in a trade deficit of $10.217 billion for this period alone.

The trade balance has recorded consecutive deficits from April (-$2.476 billion), May (-$1.6 billion), June (-$2.487 billion), to July (-$4.85 billion) this year. If the trade deficit continues for five consecutive months until the end of this month, it will be the first time in 14 years since December 2007 to April 2008.

The main reason for the trade deficit is the increase in import volume due to rising energy and grain prices. Supply chain disruptions caused by the prolonged Russia-Ukraine war have contributed to the increase in energy imports this month, including crude oil (54.1%), gas (80.4%), and coal (143.4%).

Exports to China have also been negative since May, adversely affecting the trade balance. From the 1st to the 20th of this month, the trade deficit with China was $667 million, marking four consecutive months of deficits. China's GDP growth in the second quarter was only 0.4% year-on-year due to demand slowdown caused by COVID-19 lockdowns.

Experts warn that the trade deficit may continue into early next year. Joo-won Ju, head of the Economic Research Department at Hyundai Research Institute, said, "If monthly trade deficits persist until early next year, it could cause problems with external creditworthiness."

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