Trade, the last bastion of the Korean economy, is falling into a swamp of deficits. As energy imports surged, the trade balance showed a deficit of 5.2 billion dollars until the 20th of this month. Even the current account is at risk due to the trade deficit. As the possibility of a current account deficit overlaps with the fiscal deficit due to expansionary finance, concerns are also rising about the ‘twin deficit’, which is a deficit in both the current account and the fiscal.
According to the Korea Customs Service on the 21st, exports from April 1 to 20 this year amounted to $ 36.3 billion and imports to $ 41.5 billion, respectively, compared to the same period last year, 16.9 percent ($ 5.26 billion) and 25.5 percent (8.43 billion) of imports, respectively. dollar) increased. On an annual basis, exports amounted to 209.2 billion dollars, up 17.9% from the same period last year. Imports totaled $218.4 billion on an annual basis, an increase of 28.7% ($48.7 billion) compared to the same period last year.
The trade balance from the 1st to the 10th of this month was a deficit of 3.519 billion dollars. As the number of working days increases, the extent of the deficit increases. The trade balance for April 1-10 last year was a deficit of $1.814 billion.
Looking at the export status from April 1 to 20 of this year, semiconductors (22.9%), petroleum products (82.0%), automobile parts (3.9%), etc. increased, and wireless communication devices (-10.7%), passenger cars (-1.0%), etc. This decreased.
In the case of imports, imports of oil, gas, and coal, the three major energy sources, increased by more than 80% compared to the same period last year. Imports of crude oil rose 82.6% to $6.875 billion in the same period last year, gas imports surged 88.7% to $1.942 billion, and coal increased 150.1% to $1.49 billion. Petroleum products also imported $1.942 billion, up 46.4% from the previous year. Energy imports surged due to Russia’s invasion of Ukraine, resulting in a greater increase in imports than exports. As a result, the trade balance during this period was $5.199 billion in deficit. The deficit increased by 153.1% from the $2.054 billion trade deficit in the same period last year.
If you look at the annual cumulative, the trade balance from this year to the 20th of this month was 9.157 billion dollars, turning from a 7.769 billion dollars surplus to a deficit during the same period last year. On a monthly basis, the trade balance turned into a deficit in December last year for the first time in 20 months. It showed a surplus in February of this year, but turned to deficit again last month, and a trade deficit is expected in April.
The won-dollar exchange rate, which has a significant impact on the trade balance, is also rising. As the dollar depreciates against the won, the cost of importing the same product increases and the trade balance deteriorates as a result. The previous day, the won-dollar exchange rate exceeded 1,240 won during the day. It is the first time in a month since the Ukraine crisis broke through the 1,240 won mark. Moreover, the trade deficit is expected to increase as there is a forecast that the rate of exchange rate rise may be accelerated due to the US key rate hike next month.
The current account, which shows Korea’s ability to pay externally, is also at stake due to its trade deficit. According to the Bank of Korea, the domestic current account surplus was $6.42 billion in February this year. It has been in the black for 22 months in a row. However, the surplus decreased by $1.64 billion compared to the same period last year. This is because the trade balance has deteriorated.
In addition, as the new coronavirus infection (COVID-19) crisis has continued to expand the budget, the fiscal balance is also in a chronic deficit. According to the National Assembly Budget Office, the consolidated fiscal balance after subtracting total expenditure from total government revenue is expected to reach a deficit of 70.8 trillion won this year. The possibility of a ‘twin deficit’ with both current and fiscal deficits is increasing.
Joo Won, head of the economic research department at Hyundai Research Institute, said, “The twin deficit can have a negative impact on Korea’s external credibility, exchange rate, and foreign exchange reserves.
Sejong = Reporter Kim Hyung-min [email protected]