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Freight containers fill a port in Busan, South Korea, in this undated file photo. (Yonhap News)

Korea is in its fifth consecutive month of a trade deficit in August, with imports increasing at a much higher rate than exports in the country. Experts say consideration should be given to the statistical illusion caused by increases in South Korea’s trade volume, as well as the fact that the country’s current trade deficit is structurally accompanied by an upswing in imports.

According to the Korea Customs Service on Monday, South Korea’s exports for August as of Saturday amounted to US$33.424 billion, a 3.9% increase year over year. On the other hand, the country’s imports amounted to US$43.641 billion, a 22.1% increase from the previous year’s figure.

With imports increasing at a much higher rate than exports, the country recorded a trade deficit of US$10.217 billion — a figure much larger than the trade deficit recorded during the same time period last year (US$3.579 billion) as well as the deficit recorded from Aug. 1 to Aug. 10 this year (US$7.677 billion).

After recording a trade deficit in January this year, South Korea experienced four consecutive months of trade deficits from April to July.

By item, exports of semiconductors — one of South Korea’s main exports — dropped by 7.5%. If semiconductor exports for August fall below the figure recorded in August last year, it would set a monthly record, the last time being two years and two months ago, in June 2020. South Korea’s trade balance with China for semiconductors recorded a deficit for the third consecutive month in July, the semiconductor trade deficit in August coming down to US$667 million.

South Korea’s imports have increased at a much higher rate than its exports for 14 consecutive months since June of last year. The total import amount for the three major energy sources of petroleum (US$7.244 billion), gas (US$3.18 billion) and coal (US$2.136 billion) combined was US$12.488 billion — a 71% jump from the previous year’s figure for the same time period (US$7.31 billion).

South Korea recorded its biggest trade deficit (US$20.6 billion) in 1996, right before the foreign exchange crisis. That year’s deficit amount was double that recorded in 1997 (US$8.4 billion), during the foreign exchange crisis. In other words, 1996 was a prelude to the coming danger.

The accumulated trade deficit for this year as of Saturday amounts to US$25.47 billion. While the deficit amount is much larger than that right before the foreign exchange crisis, its relative weight is not as significant. In 1996, South Korea’s total exports amounted to US$129.7 billion, while the country’s total imports came down to US$150.3 billion, resulting in a US$20.6 billion deficit. The deficit amount accounted for 7.4% of the sum total of exports and imports (US$278.3 billion).

In contrast, South Korea is expected to record US$1.5 trillion in total exports and imports this year. Compared to the sum total of exports and imports in 1996, the country’s trade volume has multiplied by a factor of 5.4. The sum total of South Korea’s exports and imports for August as of Saturday amounts to 914.5 billion won, the country’s trade deficit for the month accounting for 2.7% of that figure. In other words, the ratio of total exports and imports to deficit amount is one-third of the ratio recorded during the foreign exchange crisis.

The Korea International Trade Association projected South Korea’s yearly trade deficit to amount to US$14.7 billion, while the Korea Institute for Industrial Economics and Trade projected the figure to come out at US$15.8 billion. These predictions were made according to the outlook that South Korea’s trade balance will improve during the second half of 2022, when the price of raw materials such as energy sources and grains would fall. If these predictions turn out to be accurate, the ratio of South Korea’s trade deficit compared to its total export and import amount is expected to come out at around 1.8%.

Countries with a focus on manufacturing exports are also experiencing trade deficits recently. While Germany saw a 15.2% increase in exports during the second quarter of this year, the country’s imports jumped by 30.4% during the same time period. Germany recorded a trade surplus of 3.35 billion euros for the second quarter of 2022, a significant drop from its trade surplus of 22.6 billion euros in the first quarter. Germany’s trade surplus amount for the second quarter of 2022 was one-tenth of the trade surplus amount recorded during the same time period last year (44.9 billion euros).

Similarly, Japan saw a 15.2% increase in its cumulative exports up until the second quarter of this year, while the country’s imports shot up by 38.5%. Last year, the country’s yearly exports and imports saw similar rates of increase — 21.5% and 24.8% respectively. The country’s trade deficit has been steadily increasing this year, with its cumulative trade deficit reaching 8 trillion yen (approximately US$58.4 billion) by the second quarter.

The situation is similar in South Korea as well. While the country’s exports increased by 14.6% so far this year as of late July, its imports rose by 25.6%. Last year, South Korea’s yearly exports and imports increased by 25.7% and 31.5%, respectively, and the country recorded a trade surplus of US$44.9 billion.

An official at the Korea International Trade Association’s Institute for International Trade commented, “Due to energy and supply chain variables posed by major exporters [of South Korean goods], imports are continuing to increase at a much higher rate than exports. Although things will relatively stabilize by the second half of this year, the trade deficit may worsen depending on variables such as the conflict between the US and China and semiconductor exports.”

By Kim Hoe-seung, senior staff writer

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