Trade Deficit Shock... Will It Continue for 6 Consecutive Months?

Exports down 8.7% from September 1-20... Trade Deficit Hits $4.1 Billion
Concerns Grow Over Six Consecutive Months of Deficits... First Time in 25 Years Since 1997
Cumulative Trade Deficit Reaches $29.2 Billion... Largest in Trade Statistics History

President Yoon Suk-yeol Receiving a Report on the Development Plan of Busan New Port
(Changwon=Yonhap News) Reporter Seo Myeong-gon = On August 31, President Yoon Suk-yeol received a report on the development plan of Busan New Port and the current status of global logistics congestion response at Hanjin Terminal in Jinhae-gu, Changwon-si, Gyeongnam, before attending the Emergency Economic and Livelihood Meeting at Busan New Port. 2022.8.31
Photo by Seo Myeong-gon
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[Asia Economy Sejong=Reporter Lee Jun-hyung] The trade balance is likely to continue its deficit streak for six consecutive months for the first time in 25 years since 1997. There are also expectations that the cumulative trade deficit this year could surpass $30 billion for the first time in history.

According to the Korea Customs Service on the 21st, the trade balance from the 1st to the 20th of this month recorded a deficit of $4.105 billion. Exports amounted to $33 billion, down 8.7% compared to the same period last year, while imports increased by 6.1% to $37.1 billion. The trade balance has already recorded deficits for five consecutive months from April to last month this year. If the trade balance continues to be in deficit through this month, it will set a record of six consecutive months of deficit for the first time in about 25 years since May 1997.

The cumulative trade deficit up to the 20th of this month this year is $29.213 billion, the highest since trade statistics began in 1956. The previous record was $20.6 billion, recorded just before the foreign exchange crisis in 1996. At this rate, the cumulative trade deficit could exceed $30 billion within this month. This strengthens the prospect that the annual trade deficit could surpass $30 billion.

The main culprit behind the trade deficit is energy prices. As international energy prices soared due to geopolitical conflicts such as the Ukraine crisis, South Korea's energy imports have also surged accordingly. This explains why imports of the three major energy sources?crude oil (16.1%), gas (106.9%), and coal (12.8%)?have steadily increased every month. Additionally, energy imports from the 1st to the 20th of this month amounted to $10.53 billion, accounting for about 30% of total imports.

Concerns are also growing over the ‘twin deficits,’ where both the fiscal balance and current account run deficits. Professor Sung Tae-yoon of Yonsei University’s Department of Economics said, “If the government does not take special measures, the prolonged trade deficit is inevitable,” adding, “Although the government is making efforts to restore fiscal soundness, concerns about the twin deficits remain real.”

The government has stated its commitment to making every effort to prevent the chronic trade deficit. Accordingly, trade finance this year will be supplied up to 351 trillion won, an increase of 90 trillion won from the original plan. On the same day, Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho held a ‘Review Meeting on Export-Import Trends’ and said, “Since uncertainties in energy supply and prices remain high, we will soon prepare energy efficiency measures to reduce volatility in the trade balance,” adding, “We will also make thorough efforts to address structural issues such as the decline in export competitiveness to China.”

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