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Fears of recession grow

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Finance Minister Choo Kyung-ho holds a telephone conversation with U.S. Treasury Secretary Janet Yellen at the Government Complex Seoul, Friday. Courtesy of Ministry of Economy and Finance
Finance Minister Choo Kyung-ho holds a telephone conversation with U.S. Treasury Secretary Janet Yellen at the Government Complex Seoul, Friday. Courtesy of Ministry of Economy and Finance

By Lee Min-hyung

Korea has reported a trade deficit once again for September, extending its losing streak for the sixth consecutive month, according to data from the Ministry of Trade, Industry and Energy.

The rate of export increase came in as a single-digit figure last month, but the rate of import increase hit double digits, bringing the nation's monthly trade balance to a deficit of $3.77 billion. This was the first time that the country posted a trade deficit lasting for more than six consecutive months since May 1997.

This situation is being partly caused by the soaring burden of energy imports. Korea's imports of crude oil, gas and coal reached $17.96 billion in September, up 81.2 percent from the previous year.

"Korea will not be able to attain a high level of the export increase rate for the time being, in that the figure has reported single-digit growth since June," Trade Minister Lee Chang-yang said. The global economic slowdown, soaring energy import costs and semiconductor price fall will also affect Korea's overall export growth negatively, according to him.

"But one positive sign is that exports have reported growth for 23 months straight, and the monthly figure last month was a historical high," he said. The government is pondering measures to curb energy imports by reducing demand and increase usage efficiency.

Containers for exports and imports are stacked at a pier in Korea's largest port city of Busan on Sept. 13. Newsis
Containers for exports and imports are stacked at a pier in Korea's largest port city of Busan on Sept. 13. Newsis

The lukewarm trade performance adds more concerns to the nation's volatile financial circumstances represented by the soaring won-dollar exchange rate. The figure is on the sharp increase due to multiple external fears, mostly concerning the U.S. Federal Reserve's hawkish moves towards additional big rate hikes.

The exchange rate increased to a new high of 1,441 won per dollar at one time on Friday. The steep fall of the Korean won's valuation has been making headlines for the past few weeks, as it was the first time since the 2009 global financial crisis that the exchange rate soared past the 1,440 won mark.

Amid escalating public unrest over the won's sharp depreciation, Finance Minister Choo Kyung-ho had a conference call on Friday night with U.S. Treasury Secretary Janet Yellen.

Choo underscored the need for both sides to tighten their partnership in the foreign exchange market.

"Global monetary tightening comes as a significant burden to the Korean economy, so both sides need to strengthen their partnership on the foreign exchange market," Choo said.

Both leaders said the Korean economy still maintains solid foreign exchange liquidity and enough foreign exchange reserves despite the steep rise of the won-dollar exchange rate.

They also reaffirmed their willingness to collaborate closely with each other in case Korea detects any unusual signs of financial unrest due to a possible liquidity crunch.


Lee Min-hyung mhlee@koreatimes.co.kr


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