Korea's trade balance swung to a surplus in June after being in the red for 15 straight months. According to data released by the Ministry of Trade, Industry and Energy, Saturday, Korea's outbound shipments stood at $54.2 billion in June, down 6.0 percent from a year earlier. Imports decreased 11.7 percent to $53.11 billion.
This development shows that, amid an extended slump in trade, the drop in imports was more drastic than that the fall in exports, resulting in a surplus. Korea had suffered a trade deficit since March of last year, which was the second-longest on record after being in the red for 29 straight months between January 1995 and May 1997. June's performance is significant because it indicates a departure from an extended deficit.
However, it remains to be seen whether the current shift to a surplus will be sustained for a considerable period. It appears premature to expect a rosy outlook straight away. This is because the nation's outbound shipments have yet to fully recover. A sharp drop in global energy prices has led to a decline in imports, thereby largely contributing to the surplus. The price of Dubai crude oil fell to $74.99 a barrel last month, sharply down from $113.27 a year earlier. Given this, the nation's imports of major energy resources remained at $9.9 billion in June, down 27 percent year-on-year.
Three main energy resources ― crude oil, coal and natural gas ― account for about 20 percent of the nation's total imports. The decline in international energy prices is encouraging for Korea, which relies heavily on imports for fuel.
It is urgent, therefore, for the nation to revive its sluggish export performance and maintain a trade surplus trend. What is most significant is the trend occurring in the global semiconductor market compounded by exports to China. Korea's semiconductor exports plummeted 28 percent year-on-year last month. This represented a slight recovery from April when chip exports sank 41 percent marking the biggest drop ever. However, semiconductor exports have continued to remain sluggish, exacerbated by lackluster sales of memory chips, in particular. Against this backdrop, Korea's exports to China amounted to $60.1 billion in the first half of this year, down 26 percent from a year ago.
Now, Korea Inc. should double down on its efforts to sharpen the competitive edge of its main export products and diversify export markets, while paying close attention to the global economic trend. But the prospects of Korea's exports and trade surplus are not so bright, according to various reports submitted by domestic economic think tanks.
The Korea International Trade Association (KITA) released a report, Wednesday, forecasting the nation's exports to drop 3.1 percent in the latter half of this year, resulting in a $1.2 billion trade deficit. This indicates that the trade balance began to improve from the first half, but will continue to remain in the red.
Despite the continued decline in exports, it is noteworthy that outbound shipments dipped by the slowest rate this year. Expectations are growing over the possible recovery of exports that declined 16.4 percent in January. It is time for the Yoon Suk Yeol administration and businesses alike to mobilize all possible measures to ensure that the recent trade surplus continues.
They should make combined efforts to revitalize the momentum in order to boost exports despite diverse challenges at home and abroad. Major economies around the world have been struggling to cope with high inflations paired with interest rates hikes to curb inflation. Efforts should be focused on increasing sales of main export items such as automobiles and ships, while taking steps to cushion possible declines in semiconductor exports.