Annual Trade Deficit of $40 Billion... 8 Consecutive Months of Deficit Since IMF (Comprehensive)

Reference photo_Pyeongtaek Port container. Photo by Hyunmin Kim kimhyun81@

[Asia Economy Sejong=Reporter Dongwoo Lee] The trade balance has been in deficit for eight consecutive months for the first time in 25 years since 1997. The annual trade deficit this year has approached $40 billion. Exports, the backbone of the Korean economy, fell by more than 15% compared to the same period last year, widening the deficit.

According to the Korea Customs Service on the 21st, the trade deficit from the 1st to the 20th of this month was $4.418 billion. During the same period, exports amounted to $33.16 billion, down 16.7% year-on-year, while imports increased by 5.5% to $37.578 billion. The trade balance has been in deficit for eight consecutive months since April. Exports turned to a decline for the first time in two years last month since October 2020 (-3.9%) and have continued for two consecutive months including this month.

Since the beginning of this year until the 20th of this month, the trade deficit reached $39.968 billion. This is the first time since trade statistics began in 1956 that the cumulative trade deficit has reached about $40 billion. The previous record for the largest annual trade deficit was $20.62 billion, recorded in 1996 just before the Asian financial crisis.

Imports of the three major energy sources?crude oil, gas, and coal?are cited as the main cause of the expanding deficit. From the beginning of this month to the 20th, the combined import value of the three major energy sources was $9.859 billion: crude oil ($5.519 billion), gas ($3.026 billion), and coal ($1.314 billion). This is a 17.1% increase compared to the same period last year ($8.416 billion).

A sharp decline in semiconductor exports, a key item, also dealt a blow to the trade balance. Semiconductor exports fell sharply by 29.4% year-on-year and have been shrinking for four consecutive months since August. Steel products (-18.8%), wireless communication devices (-20.6%), precision instruments (-22.2%), and ships (-71.4%) also decreased. Exports to major regions such as China (-28.3%), Taiwan (-23.5%), Japan (-17.9%), Vietnam (-14.4%), and the European Union (EU, -1.5%) also declined.

In particular, the trade balance with China, Korea's largest trading partner, recorded a deficit of $760 million from the beginning of this month to the 20th. Exports to China have been in deficit for four consecutive months, recording $1.09 billion in May, $1.22 billion in June, $600 million in July, and $360 million in August. Although the trade balance with China turned to a surplus of $680 million in September, it is likely to record a deficit for the second consecutive month following last month’s deficit of $1.25 billion.

As the export decline continues, there are also forecasts that the annual trade deficit this year will approach $50 billion. The Korea Institute for Industrial Economics and Trade analyzed, "Geopolitical uncertainties such as the conflict between Europe-Russia and the US-China due to the Ukraine crisis continue, and financial tightening by major countries to curb inflation and increased external uncertainties are suppressing growth."

Export and Import Performance from November 1 to 20 (Unit: Million USD, %) Data provided by Korea Customs Service

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