South Korea faces the prospect of a return to a trade deficit, preliminary data show, as geopolitical and virus risks weigh on global demand for its products, while escalating energy and commodity prices boost costs.
South Korea’s exports for the first 20 days of this month advanced 10.1 percent from a year earlier, led by semiconductors and oil products, the customs office said in a release yesterday. Average daily shipments rose 26.4 percent.
Overall imports climbed 18.9 percent — fueled by energy — for a deficit of US$2.1 billion.
The wide divergence between the headline and daily average figures is due to two fewer business days this year, with March 9 a holiday for a presidential election. Daily average shipments for all of last month increased by 17.6 percent.
Russia’s invasion of Ukraine has sent energy and commodity prices soaring, weighing on international demand. That is a double-blow to South Korea, which relies on raw materials imports to manufacture high-tech products that it then sells to the world.
The Bank of Korea last month sharply raised its inflation forecast and also suggested the war in Ukraine could weigh on South Korea’s economic growth, complicating the monetary policy outlook. The central bank has hiked interest rates three times since August last year to try to cool inflation.
“We appear to be headed for an unavoidable deficit,” said Yoon Yeo-sam, an analyst at Meritz Securities in Seoul. “The burden of costlier energy imports is growing bigger even as semiconductors do well. We may not see a surplus return until oil prices drop to around US$90 per barrel.”
The latest data showed imports of crude oil climbed 57.8 percent and those for gas soared 114.3 percent. Purchases of oil products advanced 52.5 percent.
Overall exports of vehicles and automobile parts fell in the first 20 days of the month, while the sales of ships also slid, the customs data showed.
Trade deficits have been an increasing concern for South Korea, as its currency has been one of Asia’s worst performers in recent months. The nation posted back-to-back deficits in December and January amid higher energy costs, before swinging back to a trade surplus last month.
Compounding the problems for exporters is the recent lockdown of Shenzhen in response to mounting virus cases in China, the biggest trading partner of South Korea.
Exports to China rose 11.3 percent from March 1 to Sunday from a year earlier, those to the US advanced 6 percent and to Japan gained 2 percent. Shipments to the EU fell 3.9 percent, data showed.
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