Widening trade deficit clouds economy

By Lee Min-hyung

Korea's trade deficit is widening at an alarming pace amid soaring energy import costs and falling exports to China, the Korea Customs Service said Monday.

According to data from the customs agency, the nation's trade deficit between Aug. 1 and 20 came in at $10.2 billion (13.65 trillion won), up 33 percent from a month earlier. Korea's exports rose by 4 percent during the same period, but its imports surged 22 percent on global energy inflation.

Imports of crude oil, gas and coal reached $12.48 billion, up 71 percent from a month earlier, increasing the likelihood of the country reporting a trade deficit again in August. If so, it will be the first deficit lasting five consecutive months in 14 years.

The war between Russia and Ukraine has been pushing up energy prices for the past few months. Korea's imports rose by 21.8 percent in July from a year earlier on the energy crisis.

Petroleum products, cars, ships, automotive parts and electronics products saw exports increase for the first 20 days of August, but semiconductors ― one of the country's major export items ― fell by 7.5 percent during the same period.

Of particular concern is the drop in exports to China, Korea's largest trade partner. According to a report released by the Korea Institute for Industrial Economics and Trade, China accounts for 26 percent of Korea's total trade volume. Korea's trade with China recorded a deficit of 667 million between Aug. 1 and 20. Korea reported a trade surplus with Beijing for four months from January of this year, but it turned into a deficit in May.

The continued trade deficit with China is attributable to the latter's COVID-19-led lockdown measures, as well as China's state-led drive to become a “cyber great power.” The latter policy is related to China's moves to reduce its reliance on imports and comes as a major risk factor for Korea's exports.

By region, Korea's exports to the United States, the European Union, Vietnam and Singapore increased between Aug. 1 and 20, but those to China and Japan fell by 11.2 and 6.3 percent, respectively, according to data from the customs agency.