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Daewoo Shipbuilding & Marine Engineering’s Okpo shipbuilding dock in Geoje, South Gyeongsang Province. (Yonhap)

South Korea’s trade deficit is rapidly increasing as exports continue to fall sharply.

According to export and import trends released by the Korea Customs Service on Tuesday, exports totaled US$30.945 billion so far this month. This is a 17.4% decrease compared to the same period last year.

As a result, monthly exports are likely to continue to decline for the sixth consecutive month. This will be the first time in more than two years that exports have declined for six consecutive months since the period between March and August of 2020.

Semiconductors, which have been dragging down exports, were not exempt from this continuous slump. Semiconductor exports fell a whopping 44.7% year-on-year. Petroleum products (-10.6%) and steel products (-12.7%) also saw double-digit declines. This means that South Korea’s main export industries are in a serious slump. Automobile exports proved a notable exception, at nearly a 70% increase.

Another major factor behind the export slowdown was Korea’s exports to China, which were down 36.2% from the previous year for the first 20 days of March.

February was the ninth month in a row that exports to China have fallen. Korea has also seen a decline in exports to the EU (-8.9%), Vietnam (-28.3%) and Japan (-8.7%), but a 4.6% increase in exports to the US backed by car sales.

As for imports, last year’s big jump gave way to a small decline this year. Imports in the March 1-20 period were valued at US$37.27 billion, a decrease of 5.7% from the same period last year.

Coal was the only major energy source whose imports rose (19.4%), while crude oil (-10.3%) and natural gas (-23.1%) both witnessed a double-digit decline.

With exports falling much faster than imports, the trade deficit has continued to balloon. As of March 20 this year, Korea had reported a cumulative trade deficit of US$24.13 billion, hitting half of last year’s record-setting trade deficit of US$47.8 billion in just three months.

The critical question is when Korea’s exports will bottom out. The Korea International Trade Association (KITA) reported Tuesday that the export business survey index (EBSI), which tracks the expectations of Korean exporters, was 90.9 for the second quarter of the year (April through June).

While the EBSI remains below 100, it’s a fair bit higher than in the first quarter of the year (81.8). That accounts for expectations that exports’ nosedive will slow in the second quarter, even if they’re unlikely to rebound.

Hong Ji-sang, a researcher with KITA’s trends analysis office, said that Korea’s recent export underperformance is due to “the slowdown of exports of intermediate goods, which represent a large share of our total exports.”

Intermediate goods are those used as inputs in making final products.

“Given how sensitive intermediate goods are to the global economy, the possibility of Korean exports recovering this year will depend on the global economic situation,” Hong said.

By Park Jong-o, staff reporter

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