Trade Deficit Nears $50 Billion... South Korea's 'Growth Engine' in Emergency (Comprehensive)

Exports from December 1-20 total $33.6 billion, down 8.8% YoY
Imports at $40.1 billion...Cumulative trade deficit of $49 billion
Semiconductor exports plunge 24.3%...Declining for 5 consecutive months

[Image source=Yonhap News]

[Asia Economy Sejong=Reporter Lee Junhyung] The trade deficit accumulated up to December 20 this year has nearly reached $50 billion. The expectation that the annual trade balance will turn to a deficit for the first time in 14 years since the 2008 financial crisis has become a reality. Exports, which have been a pillar of the Korean economy, are also likely to continue negative growth for the third consecutive month.

According to the Korea Customs Service on the 21st, exports from December 1 to 20 amounted to $33.6 billion, down 8.8% compared to the same period last year. The average daily export value, considering the number of working days (15.5 days), also decreased by 8.8% over the past year. On the other hand, imports during the same period increased by 1.9% to $40.1 billion. As a result, the trade balance recorded a deficit of $6.5 billion. The trade balance has been in deficit for eight consecutive months from April to November this year.

The accumulated trade deficit up to the 20th of this month this year was $49 billion. This is the first time since trade statistics began in 1956 that the cumulative annual trade deficit has surpassed the $40 billion mark. At this rate, the annual trade deficit this year could exceed $50 billion. The previous record for the largest annual trade deficit was $20.62 billion, recorded in 1996 just before the foreign exchange crisis.

The reason behind the record-high trade deficit lies in energy prices. Due to global supply chain instability, energy prices surged, causing import values to increase accordingly. Among major import items from December 1 to 20, the three main energy sources?crude oil (15.4%), gas (100.7%), and coal (14.1%)?showed significant growth. In November as well, imports of these three energy sources amounted to $15.51 billion, up 27.1% compared to the same period last year.

To make matters worse, exports have been experiencing negative growth since October. The semiconductor sector, which had been a key export driver, has fallen into a 'negative growth swamp.' Semiconductor exports from December 1 to 20 were $5.584 billion, plunging 24.3% compared to the same period last year. Semiconductor exports have been in negative growth for five consecutive months. Other major export items such as steel (-17.4%), wireless communication devices (-43.8%), and home appliances (-23.3%) also showed declines.

Trade with China, Korea's largest trading partner, has also contracted. Exports to China from December 1 to 20 were $7.198 billion, down 26.6% compared to the same period last year. Imports from China during the same period decreased by 11.6% to $8.045 billion.

Concerns are growing that trade could fall into a structural deficit. Professor Sung Tae-yoon of Yonsei University's Department of Economics said, "The overall deterioration of export performance is intensifying," adding, "Export sluggishness could lead to weakened corporate investment sentiment and difficulties in foreign exchange procurement, potentially accelerating economic downturn."

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