Korea Suffers Longest Run of Trade Deficits Since 1997

  • By Jo Jae-hee

    October 04, 2022 10:41

    Korea suffered a sixth consecutive month of trade deficits for the first time in 25 years in September. 
    The country posted a US$3.77 billion trade deficit last month, the first six-month run of trade deficits since May 1997, just before the Asian financial crisis erupted. 
    According to the Ministry of Trade, Industry and Energy on Sunday, Korea's exports increased a sluggish 2.8 percent in September to $57.46 billion, but imports surged 18.6 percent to $61.23 billion. 
    Imports have stood at over $60 billion for seven months running due to rising energy import costs. Imports of crude oil, gas and coal surged 81.2 percent from a year ago to $17.96 billion. But if international oil prices remain stable, the trade deficit could gradually narrow.
    Exports have been growing for 23 months despite unfavorable external conditions, but growth has slowed to just 2.8 percent, the lowest rate since a 3.9 percent contraction in October 2020 at the height of the coronavirus pandemic. 
    Now there are fears that exports could actually shrink as a result of global economic turmoil. 
    Korea's exports to the U.S. increased 16 percent, but shipments to China shrank 6.5 percent, the Commonwealth of Independent States 29.9 percent and the EU 0.7 percent. 
    Analysts said Korea needs to focus on export growth. Joo Won at the Hyundai Research Institute said, "The economy is slowing in China, our biggest export market, and there has been a drop in demand for semiconductors, our top export item. We may see trade turn to a surplus, but that would not be because exports increase but because imports decline at an even faster clip," due to the economic slump. 
    Kim Jung-sik at Yonsei University warned, "As a U.S.-led supply chain materializes that excludes China, exports could decline further until the first half of next year." 
    The Korea Economic Research Institute expects this year's trade deficit to reach $48 billion, beating the previous record of $20.6 billion set in 1996. 
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