Trade surplus target raised to $32 billion

By Kim Tae-gyu

Despite rising crude oil prices and a strong Korean currency, the country is expected to chalk up a far bigger trade surplus this year than expected, according to a state-run think tank.

The Korea Institute for Industrial Economics and Trade (KIET) Monday came up with the upbeat expectation that the nation will see a $32 billion trade surplus this year, up 28 percent from the original estimate of $25 billion.

The government plans to disclose its official version of the upgraded surplus target in early July in lieu with the KIET estimate, which reflects strong export performances earlier this year. “For the first six months, Korea is estimated to have recorded a surplus of $18.4 billion. Over the latter half, the figure is projected to shrink but still remain solid at $13.6 billion for a total of $32 billion,” KIET President Song Byoung-jun told a press meeting.

“Automotive, machinery, petrochemical, steel and textile industries will underpin brisk outbound shipments in the July-December period through double-digit growth rates. Info-tech businesses are likely to put up relatively weak figures,” he said.

The only bright side of the IT industry is that exports of displays will return to positive territory from an 8.5 percent dip during the first half from a year ago to a 3.9-percent improvement in the final two quarters year-on-year.

Overall, KIET predicted that Korea Inc. will post $562 billion in exports and $530 billion in imports for 2011, raising the annual trade volume over the $1 trillion mark for the first time in history.

This would be quite an achievement in consideration of the unfavorable conditions of high crude prices and a strong Korean won, which were feared to become an explosive cocktail weighing down on the export-driven economy.

KIET originally expected that Dubai oil prices would be somewhere around $85 a barrel on the average while the won-dollar exchange rate fluctuates at around 1,100 won for the $25 billion surplus objective to be possible.

But the Seoul-based agency raised it to $32 billion in spite of expectations that the average price of Dubai oil will be $110 per barrel and the won-dollar rate will be as low as 1,070 won.

“The country managed to clock impressive export volumes in the first half in the face of some headwind. Hence, we agree with the KIET projection that the overall surplus would be higher than our initial estimate,” said Kang Min-suk, a director at the Ministry of Knowledge Economy, the ministry that oversees KIET.

“Yet, there remain some uncertainties such as the sovereignty default concerns of Greece, which is causing woes in the global system,” he said.

In the meantime, KIET projected that real gross domestic product (GDP) would expand by 4.5 percent this year, which is in line with the projection of the central bank.