Exports from January 1-20 at $33.6 billion... 2.7% ↓
Imports at $43.9 billion... Trade deficit of $10.3 billion
Trade with China also worsens... $3.24 billion deficit
[Asia Economy Sejong=Reporter Dongwoo Lee, Sejong=Reporter Junhyung Lee] Since the beginning of the new year, the trade deficit has exceeded $10 billion as of the 20th of this month. During the same period, the trade deficit with China reached $3.24 billion, continuing a negative trend since the second half of last year. With exports declining for four consecutive months compared to last year, concerns are growing that the external soundness of the Korean economy is being shaken.
According to the Korea Customs Service on the 21st, exports (provisional customs clearance basis) from the 1st to the 20th amounted to $33.62 billion, down 2.7% from the same period last year ($34.55 billion). Considering the number of working days (16 days), the average daily export value was $2.1 billion, a decrease of 8.8% compared to the same period last year. Exports have shown a high possibility of negative growth for four consecutive months from October last year to this month. This is the first time exports have declined for four consecutive months since the COVID-19 outbreak intensified from March to August 2020. On the other hand, imports during the same period were $43.89 billion, up 9.3% from the same period last year.
As a result, the trade balance recorded a deficit of $10.26 billion as of the 20th of this month. This surpasses the previous monthly record deficit of $9.435 billion set in August last year. In terms of annual scale, this amount accounts for 22% of last year's total trade deficit ($47.5 billion), which was the largest ever recorded. If the trade deficit continues until the end of this month, it will mark ten consecutive months of deficits since April last year. This is the first time since January 1995 to May 1997 that such a streak has occurred.
The ongoing trade deficit is largely due to deteriorating trade relations with China, Korea's largest trading partner. From the 1st to the 20th of this month, the trade deficit with China was $3.244 billion. Exports to China were $6.77 billion, down 24.4% from the same period last year, while imports increased by 9.7% to $10.014 billion. The trade balance with China shifted from a deficit for four consecutive months from May to August last year to a surplus in September, but has returned to a deficit trend since October. Until 2018, China was Korea's largest trade surplus partner, but last year it fell outside the top 20. This indicates that Korea did not profit from trade with China as much as before.
Semiconductors, a key export item, are also experiencing negative growth. Semiconductor exports from the 1st to the 20th of this month were $4.426 billion, a sharp decline of 34.1% compared to the same period last year. Semiconductor exports have been decreasing for five consecutive months since August last year. The decline rate exceeded 20% since November last year and surpassed 30% from the 1st to the 20th of this month. Additionally, exports of steel products (-11.2%), precision instruments (-9.9%), computer peripherals (-44.9%), and home appliances (-47.5%) also showed a downward trend.
The high import volume of the three major energy sources is also negatively impacting the improvement of the trade balance. As of the 20th of this month, the combined import value of crude oil ($5.383 billion), gas ($4.581 billion), and coal ($1.754 billion) totaled $11.718 billion, a 16.0% increase compared to the same period last year ($10.01 billion).
Due to the decline in exports to China and the stagnation of key export items, the trade deficit trend is likely to continue in the first half of this year. According to the 2023 Economic Policy Direction announced by the government last month, exports are expected to decrease by 4.5% compared to last year. In response, the government plans to push for the passage of a revision to the Restriction of Special Taxation Act, which provides exceptional tax benefits for national strategic technologies such as semiconductors, at the next extraordinary session of the National Assembly. At the same time, all ministries and export support agencies will unite their efforts to increase exports.
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