Saving Export Companies to End Trade Deficit in the Second Half of the Year

Government Provides Maximum Trade Finance Support
Cumulative Trade Deficit This Year Hits $25 Billion
Largest Since Statistics Began in 1956
Focus on Long-Term Export Structure Improvement

The government's decision to provide the largest-ever trade finance support to export companies is rooted in this year's cumulative trade deficit surpassing $25 billion, marking the highest level since trade statistics began in 1956. Although the trade deficit is largely influenced by the sharp rise in energy prices, there is significant concern that if this trend continues through the end of the year, the trade balance could worsen further.

This year's trade balance has recorded consecutive deficits from April (-$2.476 billion), May (-$1.6 billion), June (-$2.487 billion), to July (-$4.805 billion). 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 government’s comprehensive support for Korean export companies is based on the analysis that breaking the cycle of trade deficits in the second half of this year is the most urgent task. In particular, this support plan is evaluated as focusing on improving the export structure from a long-term perspective. To support exports of relatively vulnerable small and medium-sized enterprises (SMEs), export growth financing will be provided on a scale of 50 billion won even if there are no export records. Export credit guarantees for semiconductor materials, parts, and equipment SMEs will be expanded by 1.5 times with preferential treatment, and guarantee fees will be discounted by 20%. The government emphasized, "We will strengthen support throughout the entire export cycle for promising small business owners to broaden the base of exports."

The plan also includes measures to promote the use of liquefied petroleum gas (LPG) co-firing and the conversion of industrial fuel using city gas to LPG, aiming to reduce energy import costs and break the vicious cycle of trade deficits. By July this year, imports of the three major energy sources?crude oil, gas, and coal?amounted to $106.6 billion, an 88.3% increase compared to the same period last year ($56.6 billion), directly impacting the trade deficit.

Moon Dong-min, Director of the Trade and Investment Office at the Ministry of Trade, Industry and Energy, mentioned at a pre-briefing on the 30th, "Unless there are special variables, we are worried that the total trade deficit for this year might occur," reflecting concerns over growing external uncertainties such as energy import prices. The government expects that this energy-saving measure will reduce energy import costs by about $1.4 billion during this winter season.

The government is also tightening control over the export market, which has been slowing since June. Starting in October, a trade and investment strategy meeting chaired by the Prime Minister will be held. Through this, the government plans to act as a control tower overseeing cross-ministerial export strategies.

The Ministry of Trade, Industry and Energy will operate export field support teams from next month in collaboration with trade-related organizations such as KOTRA and the Korea Trade Insurance Corporation, as well as industry-specific associations, to address the difficulties faced by export companies. Support for the growth of promising export industries such as bio, secondary batteries, and consumer goods will also be strengthened. From this year until 2026, 11,000 bio-process specialists will be trained, and 113.2 billion won in research and development funds will be provided by 2025 for 27 urgently needed domestically produced items, including vaccine enzymes.

Professor Jeong In-gyo of Inha University’s Department of International Trade said, "Along with the most necessary financial policies for export companies, exchange rate stabilization is urgently needed," adding, "Customized support by country and product is necessary to resolve the export difficulties faced by companies."

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