Last Year, South Korea's Trade Dependency Hits Lowest in 3 Years... Still High Among Major Countries

[Image source=Yonhap News]

[Asia Economy Reporter Kim Eun-byeol] Due to sluggish exports last year, Korea's 'trade dependence'?the proportion of exports and imports in the overall economy?fell to its lowest level in three years.

According to the National Statistical Portal of Statistics Korea on the 18th, Korea's trade dependence last year, calculated by dividing the total export and import amount by the Gross Domestic Product (GDP), was 63.51%, down 2.57 percentage points from 66.08% the previous year. At the same time, it recorded the lowest level in three years since 2016 (60.11%).

The export dependence, which is the ratio of total exports to GDP, dropped to 32.94%, the lowest level in 12 years since 2007 (31.68%). The import dependence, the ratio of total imports to GDP, was 30.57%, marking the lowest point in three years since 2016.

A higher trade dependence indicates that a country's economy relies more heavily on exports and imports. It also means that the national economy is more likely to be influenced by economic fluctuations in major trading partners or the global economic situation.

Due to Korea's economic structure, which has grown through a limited domestic market and export-driven growth, its trade dependence is higher than that of major advanced countries such as the United States and Japan.

Although trade dependence decreased last year, among the 12 G20 countries with available statistics, Korea ranked second highest after Germany (70.82%), and among the 37 member countries of the Organisation for Economic Co-operation and Development (OECD), it ranked 15th, still in the upper-middle range. The United States recorded 19.34%, and Japan 28.08%. These two countries have large populations and domestic markets, resulting in a domestic-oriented economic structure.

Korea's export dependence has been excessively high, and there have been continuous calls to activate the domestic market to reduce trade dependence.

The problem is that the decline in trade dependence last year was largely due to a decrease in exports rather than an expansion of the domestic market. According to the Ministry of Trade, Industry and Energy, exports last year amounted to $542.41 billion, down 10.3% from the previous year. This double-digit decline in Korean exports was the first in 10 years since the global financial crisis in 2009 (-13.9%). Last year's exports were significantly affected by external factors such as the US-China trade dispute, the semiconductor downturn, and falling oil prices.