November 30, 2024

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The Ministry of Trade, Industry and Energy (front row) at the government complex is seen in the administrative city of Sejong on Saturday. (The Korea Herald)

SEJONG -- South Korea has posted a trade deficit for the fourth consecutive month in the wake of a noteworthy decline in exports to China and spiraling import prices of raw materials, with the cumulative deficit for the first seven months of the year the highest in 66 years.

In particular, the nation recorded all-time high imports in July due to a spike in energy prices, state data showed Monday.

According to the Ministry of Trade, Industry and Energy, the nation suffered a trade deficit of $4.6 billion in July. This marked the first time in 14 years that Korea has recorded a trade deficit for four consecutive months. The last time was in 2008, when the global financial crisis hit the nation.

Further, the figure of $4.6 billion was the highest among the four monthly deficits between April and July.

While the nation recorded $60.7 billion in exports in July, up 9.4 percent compared to the corresponding month of 2021, imports surged by 21.8 percent on-year to hit the record-high of $65.3 billion.

On a cumulative basis for the first seven months of 2022, Korea posted a deficit of $15.02 billion, marking the worst trade balance for the January-July period since the nation started compiling the relevant figures in 1956.

Some market insiders raise the possibility that the nation could see both fiscal and current account deficits in 2022, for the first time in 25 years. The last dual deficit was seen during the 1997 Asian currency crisis.

In July, energy-related products led the surge in imports. Inbound shipments of crude surged by 115.2 percent on-year, liquefied natural gas by 39.8 percent and coal by 29.9 percent.

Import prices of Dubai crude rose from $72.9 per barrel in July 2021 to $103.1 in July 2022. Prices of coal from Australia jumped from $149.9 to $410.2 per metric ton over the same period.

While prices of other raw materials surged, global inflation in agricultural products such as wheat and corn were found to have contributed to the nation’s trade deficit.

Imports of wheat and corn increased by 29.1 percent and 47.6 percent, respectively. In addition, imports of semiconductors -- core intermediate goods for the nation’s industrial output -- rose by 25 percent.

The situation comes amid fast economic normalization in the global economy from the pandemic as well as the protracted war between Ukraine and Russia.

Despite the balance in the red, exports were still brisk last month. The figure of $60.7 billion marked the highest of any July in history.

Outbound shipments of petroleum products increased by 67.2 percent on-year, vessels by 29.2 percent, automobiles by 25.3 percent and secondary batteries by 11.8 percent.

But exports of computers declined by 27.3 percent, home appliances by 18.7 percent, textiles by 9.6 percent and mobile telecommunications by 3.5 percent.

By destination, shipments of all products to China fell by 2.5 percent amid the economic powerhouse’s lockdowns of major cities. Exports to Japan and South and Central America fell by 1.4 percent and 7.9 percent, respectively.

Korea recorded a deficit for the third consecutive month in trade with China, the nation’s largest trade partner.

Shipments to India increased 92.4 percent, and those to the Association of Southeast Asian Nations increased by 20.9 percent, followed by the US (14.6 percent), the European Union (14.6 percent) and the Middle East (11.7 percent).

Ministry data showed that China’s share among export destinations has continued to fall over the past few years. While it accounted for 26.8 percent of the total outbound shipments of Korea in 2018, its portion fell to 25.3 percent in 2021 and 23.2 percent in the first half of 2022.

In contrast, the share of ASEAN and the US climbed to 18.5 percent and 15.7 percent in the first half of 2022, while their portions stayed at 16.6 percent and 12 percent in 2018.

Industry Minister Lee Chang-yang said in a statement that the government would unveil comprehensive measures, such as deregulations and specialized supports by industrial segment, to boost exports in August. He also said that “it is time to conduct risk management surrounding the industry and trade.”

By Kim Yon-se (kys@heraldcorp.com)