Trade Deficit of $25.8 Billion Over 100 Days This Year... Four Times Larger Than Same Period Last Year

As the trade deficit continues with import values exceeding export values until the 10th of this month, the cumulative deficit from January to April this year is expected to surpass $25 billion.

According to the Korea Customs Service on the 11th, the trade deficit from the 1st to the 10th was $3.417 billion, marking the 14th consecutive month of trade deficits since March last year.

The cumulative deficit including results up to the 10th of this month stands at $25.861 billion. This is because cumulative imports amounted to $191.432 billion, a 2.7% decrease compared to the same period last year, while exports sharply declined by 12.3% to $165.571 billion.

Looking at previous results, the monthly total deficit size shows a similar trend to the results from the 1st to the 10th. Last month, the trade deficit was $4.995 billion from the 1st to the 10th and increased to $6.323 billion by the 20th, but the total for March was $4.621 billion. The deficit size from the 1st to the 10th was similar to the monthly total deficit. In February this year, the total deficit was $5.3 billion, not much different from the $4.971 billion recorded from the 1st to the 10th. Considering this, the trade deficit for this month is expected to be around $25 billion. The cumulative deficit up to April last year was only $6.137 billion.

(Photo) [Image source=Yonhap News]

원본보기 아이콘

The accumulation of trade deficits means that the amount South Korea imports from overseas exceeds the amount it exports to other countries. Kang Insu, professor of economics at Sookmyung Women's University (former president of the Korean International Trade Association), expects the deficit trend to continue until the end of this year. He expressed concern, saying, "Given the high volatility in energy prices and recent OPEC Plus production cut announcements, it is not optimistic to expect a reduction in import values."

The main contributors to South Korea's growing trade deficit are semiconductors and trade with China. Semiconductor exports in March were $8.598 billion, down 34.5% compared to the same period last year. This decline is more than double the overall export decrease (-13.6%). Semiconductor exports have been declining for nine consecutive months from August last year (-7.8%) through April.

For South Korea, which heavily depends on energy imports, the still high international oil prices are also a burden. The average monthly energy import value over the past 10 years (2013?2022) was $9.6 billion, but the average in March this year was $14.5 billion, $4.8 billion higher.

Due to the sharp decline in semiconductor exports and other factors, exports to China and ASEAN are also sluggish. As of March, exports to China were $10.4 billion, a 33.4% plunge compared to the same period last year. This trend is expected to continue this month, making it highly likely that the trade balance with China will record a deficit for 11 consecutive months through April.

This sluggishness in semiconductor and China-bound exports continues this month as well. Semiconductor exports amounted to $1.77 billion, down 39.8% year-on-year. Exports to China also decreased by 31.9% to $2.666 billion.

In response to the ongoing trade deficit situation, the government plans to announce measures to strengthen export competitiveness by industry sector within this month. These measures will include plans to enhance competitiveness and expand exports in sectors such as shipbuilding, digital industry, medical devices, green industry, seafood, and design.

Professor Kang stated, "If the deficit trend prolongs, South Korea's external creditworthiness and trustworthiness will inevitably decline, and if the national credibility itself falls, evaluations of domestic companies will also worsen, causing many secondary adverse effects. Active efforts at the national level, such as diversifying export markets and expanding trade finance, must be vigorously pursued."

© The Asia Business Daily(www.asiae.co.kr). All rights reserved.