By Lee Hyo-sik
Staff Reporter
The nation's trade terms hit an all-time low last year as high oil and other raw material prices sharply raised its import prices, while its export prices grew at a slow pace amid increasing competition on the overseas markets. But the country's export income rose to a record-high as local companies shipped the largest amount of goods abroad, despite low profitability.
According to the Bank of Korea (BOK) Friday, the commodity terms of trade index, a key indicator measuring how many imports a nation can buy with its per-unit export earnings, stood at 70.2 in 2007, down 4.1 percent from a year earlier.
This means that Korea could buy 0.7 units of imports with one export unit, indicating that the country's purchasing power has weakened.
The terms of trade have worsened over the past few years as domestic exporters have not been able to increase prices in line with rising raw materials costs to maintain their price competitiveness on the global market amid intensifying competition.
Additionally, a stronger won against the dollar and other currencies has chipped away at the price competitiveness of local companies, making it harder for them to earn money abroad.
``Last year, the terms of trade deteriorated because increasing competition overseas prevented domestic exporters from raising prices. But above all, high prices of crude oil and other commodities were the main culprit behind the country's worsening trade conditions,'' a BOK official said.
Per-unit import price jumped 5.8 percent from 2006, while per-unit export price rose only 1.6 percent.
Meanwhile, the income terms of trade index, measuring how much a nation could buy in imports with its total export earnings, rose to an all-time high of 160.5, up 7.4 percent from 2006. This means exporters increased outbound shipments, regardless of the worsening terms of trade, to either maintain or expand overseas market shares.
Last year, exports recorded a double-digit growth of 11.9 percent from the previous year.