For the sixth month in a row, the trade deficit was over 5 trillion won in September. This is the first time since the IMF crisis 25 years ago that there has been a deficit for six straight months. A study shows that this year’s trade deficit will be the largest ever, at 50 billion U.S. dollars. As the Korean economy’s engine of growth struggles, there are more worries about a possible recession.
The Korea Ministry of Trade, Industry, and Energy says that in September, exports were 57.46 billion dollars (about 83 trillion won), which is a 2.8% increase, and imports were 61.2 billion dollars, which is an 18.6% increase from the same month last year. Since imports went up much more than exports, there was a 3.77 billion dollar trade deficit.
Notably, the exports of semiconductors, which were a big part of the Korean trade, fell for two months. After four months of a deficit, exports to China, which were the main way Korea earned foreign currency, went back up to a surplus last month. Still, exports have been going down for four months in a row compared to the same month last year.
The trade deficit continues
Because of the semi-con and China shocks, Korea’s total exports grew by less than 10%. On the other hand, imports of the top three energy sources—oil, coal, and gas—rose by 81.2% despite the war in Ukraine. If the trade deficit keeps going up, there are more worries that the current balance, which looks at all goods and services traded between Korea and the rest of the world, could also go negative.
The future also doesn’t look good. In the 2022 Trade Balance Outlook and Insights, released on Sunday, the Korea Economic Research Institute (KERI) said they thought the negative trade balance would reach a record high of 48 billion dollars, which would be a new high. Choo Kwang-ho, head of KERI’s Economic Policy Department, said, “We need policy-wide efforts to stabilize the exchange rate. This includes stabilizing the supply chain and promoting the development of overseas resources. We also need to encourage companies to bring their cross-border reserves back to Korea and extend currency swaps with major countries.
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