S. Korea poised to record first annual trade deficit in 14 years, report claims

Posted on : 2022-06-22 17:21 KST Modified on : 2022-06-22 17:21 KST
Soaring costs of raw materials are likely to outweigh strong export performance
Containers fill a shipyard in South Korea. (Yonhap News)
Containers fill a shipyard in South Korea. (Yonhap News)

Researchers are predicting that South Korea’s annual trade balance for 2022 will show a deficit of US$14.7 billion.

The Institute for International Trade, affiliated with the Korea International Trade Association, published a report Tuesday including its assessment of imports and exports during the first half of 2022 and projections for the remaining months.

In its forecast, it predicted that annual exports for 2022 would total US$703.9 billion, a rise of 9.2% from last year, while imports would total US$718.5 billion, an increase of 16.8%. On this basis, it projected a trade deficit of US$14.7 billion for Korea.

This would be South Korea’s first negative annual trade balance in 14 years.

Noting that exports were performing strongly despite difficult conditions with the war in Ukraine and China’s pandemic lockdown measures, the report predicted that exports would exceed US$700 billion annually for the first time in Korea’s history.

Semiconductor exports, in particular, were expected to grow by 10.2% over their 2021 levels thanks to foundry demand, with additional major rises predicted for petroleum product (50.5%) and petrochemical (9.6%) exports on the strength of increased volumes and rising prices.

The dollar value of automobile exports was also projected to rise by 11.1% from 2021 amid rising unit prices, despite the production and distribution setbacks resulting from the semiconductor supply crunch.

But ship exports were predicted to decline by 21.9% from their 2021 levels amid a sharp decrease in delivery volumes following a steep decline in orders during the pandemic, as well as delays in the delivery of large LNG ships that had been scheduled for exportation to Russia. Steel exports were similarly expected to decline by 12.2% due to a partial downward adjustment in prices during the second half of the year.

Despite the strong overall performance for exports, the report predicted that imports would outweigh exports in terms of dollar value during the second half of 2022 amid steep rises in the cost of key raw materials such as crude oil.

Between January and May 2022, the four major energy sources — crude oil, natural gas, coal, and petroleum products — accounted for over one-quarter of all imports (27.6%). As the Ukraine situation drags on into the long term, crude oil prices were expected to remain above US$100 per barrel during the second half of the year.

But with a recent decision by members of the Organization of the Petroleum Exporting Countries, or OPEC, to increase crude oil production, and with global economic slowdown conditions raising the possibility of a decline in oil prices, the report predicted that the trade deficit scale during the second half of the year would amount to US$3.3 billion, or significantly less than the US$11.4 billion deficit during the first half.

By Kim Hoe-seung, senior staff writer

Please direct questions or comments to [english@hani.co.kr]

button that move to original korean article (클릭시 원문으로 이동하는 버튼)

Related stories

Most viewed articles