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Freight containers fill a port in the southern city of Busan. (Yonhap)

On Thursday, the Ministry of Trade, Industry and Energy (MOTIE) released a tentative report on South Korea’s export and import trends for August, which included multiple details that cast a dark shadow on the country’s economy, which relies heavily on exports. Although South Korea’s export figure fared better than expected amidst economic slowdowns domestically and abroad, its trade balance continued to worsen due to surging energy prices and steep increases in imports.

A recession in China, the biggest importer of South Korean goods, as well as a deteriorating industry outlook for the semiconductor sector, the largest contributor to South Korean exports, are factors considered to have negatively affected South Korea’s trade balance, along with skyrocketing import prices for energy sources.

South Korea recorded a trade deficit of US$9.47 billion in August, with exports amounting to US$56.67 billion, a 6.6% increase from August of last year, while imports were tallied at US$66.15 billion, having jumped by 28.2% from the year before. This is the largest the country’s monthly trade deficit has ever been since trade statistics began to be measured 66 years ago, in 1956.

Even considering how much South Korea’s economy has grown, the country’s trade deficit amount for August was almost double the previous record of US$4.95 billion set in January of this year, adding to concerns.

This year, South Korea recorded monthly trade deficits in January as well as in April (US$2.477 billion), May (US$1.6 billion), June (US$2.487 billion), and July (US$4.85 billion). The last time the country recorded five consecutive months of trade deficits was a little over 14 years ago, from December 2007 to April 2008.

South Korea’s yearly cumulative trade deficit amount as of August has snowballed to US$24.72 billion, exceeding the record of US$20.6 billion set in 1996. The country’s trade balance with China also recorded a deficit of US$380 million for the fourth month since May, when the trade deficit with China amounted to US$1.094 billion.

Energy imports for August almost doubled compared to the year before, having shot up by 91.8%, or US$8.86 billion, totaling US$18.52 billion. The MOTIE explained that this immensely contributed to the import increase in general, playing a big part in causing a trade deficit.

Export figures weren’t a cause for concern in and of themselves, as the month’s export total was the highest it’s ever been for South Korea during the month of August. Even compared to the previous record set in August of last year (US$53.1 billion), this August’s export figure was higher by US$3 billion. By item, petroleum product exports increased by 113.6%, while automobile and secondary battery exports grew by 35.9% and 35.7%, respectively.

On the other hand, due to weakening global demand and declining prices, semiconductor exports decreased by 7.8%, totaling US$10.78 billion — the first instance of negative growth since June 2020, when chip exports decreased by 0.03%.

August’s imports were the highest they’ve ever been, with imports of energy sources such as crude oil, gas and coal increasing along with semiconductor imports (26.1%) and imports of subsidiary materials such as lithium hydroxide and nickel-cobalt hydroxide (82.8%).

Cho Sang-hyeon, the director of the Institute for International Trade at the Korea International Trade Association, explained, “The gap [between exports and imports] expanded relatively speaking, as the rate of increase for exports dropped to the single digits since June while imports continued to steeply increase.”

Exports increased by 21.4% in May, 5.3% in June, 9.2% in July, remaining in the single digits in August as well, while imports increased by 31.9% in May, 19.3% in June, 21.8% in July, staying close to the 30% range in August as well.

The won-to-dollar exchange rate at the Seoul foreign exchange market closed at 1,354.9 won on Thursday, having jumped by 17.3 won from the previous day due to factors such as August’s worsened trade balance. The KOSPI closed at 2415.61, having fallen by 56.44 points (2.28%) from the day prior.

By Kim Young-bae, senior staff writer

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