Trade Deficit Risk in First Month of New Year... Semiconductor Declines for 6 Consecutive Months (Comprehensive)

[Asia Economy Sejong=Reporter Dongwoo Lee] The trade balance is likely to continue its deficit streak for 10 consecutive months for the first time in 25 years since 1997. Since the beginning of the new year, exports have continued to decline for four months as of the 10th of this month, raising concerns about the external soundness of the Korean economy.

According to the Korea Customs Service on the 11th, the trade balance from January 1 to 10 recorded a deficit of $6.272 billion. Exports amounted to $13.862 billion, down 0.9% compared to the same period last year, while imports increased by 6.3% to $20.134 billion. The trade deficit has continued for 10 consecutive months from April last year to the 10th of this month.

During this period, the number of working days was 7.5, one day more than the same period last year (6.5 days). Considering the number of working days, the average daily export amount decreased by 14.1%, indicating a larger decline.

The decline in exports has also continued for four consecutive months from October last year to this month. Exports of semiconductors, a key item, amounted to $2.047 billion as of the 10th, down 29.5% compared to the same period last year. The problem is that the decline in semiconductor exports is widening. The decline rate was 28.6% in November and 27.8% in December last year, continuing for six months. In addition, exports of major items such as precision instruments (-11.5%), steel products (-12.8%), and home appliances (-50.4%) also decreased compared to the same period last year. On the other hand, exports of passenger cars (51.7%), wireless communication devices (43.5%), and petroleum products (26.9%) increased.

During the same period, exports to China, the largest trading partner, decreased by 23.7%, widening the deficit. The trade deficit with China has continued for more than half a year except for a surplus of $680 million in September last year. China's zero-COVID policy and regional lockdowns leading to economic slowdown have directly impacted the trade deficit with China. China, which was Korea's top trade surplus country in 2018, fell out of the top 20 last year.

At dawn, the sun rises over a large container ship waiting to load export cargo near Busan Port.
Busan - Photo by Yoon Dong-joo doso7@

During the same period, imports increased by 6.3% to $20.134 billion. By major items, imports of semiconductors (9.5%), coal (26.0%), and machinery (28.5%) increased, while crude oil (-6.5%) and gas (-12.9%) decreased.

Notably, from the beginning of this month to the 10th, the combined imports of the three major energy sources decreased compared to the same period last year. This is the first time in 10 months since February last year that imports of the three major energy sources have declined. During this period, the combined imports of crude oil ($2.132 billion), gas ($2.078 billion), and coal ($84 million) totaled $5.014 billion, down 5.5% from $5.305 billion in the same period last year.

By region, imports from the EU (17.3%), China (16.1%), and the United States (2.8%) increased, while imports from Japan (-7.1%), Saudi Arabia (-16.1%), and Malaysia (-12.7%) decreased.

Experts predict that the trade deficit will continue through the first half of this year. The Korea Development Institute (KDI) stated, "The manufacturing sector continues to decline due to sluggish exports centered on semiconductors," and "there is a growing possibility of economic slowdown in the future."

Meanwhile, Korea's trade deficit last year reached a record high of $47.2 billion. The trade balance turned to a deficit for the first time in 14 years since the 2008 financial crisis. Although exports increased to an all-time high last year, imports surged significantly due to rising international energy prices.

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