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| Korea International Trade Association (KITA) Chairman Koo Ja-yeol speaks about next year's trade forecast and conditions during a press conference held at the Trade Tower in Seoul, Wednesday. Courtesy of KITA |
By Kim Hyun-bin
Korea's trade environment will worsen next year compared to this year due to the uncertainties surrounding the global economy, Korea International Trade Association (KITA) Chairman Koo Ja-yeol said during a press conference commemorating the 59th Trade Day held at the Trade Tower in Seoul, Wednesday.
"The global economy is expected to enter a rapid downturn due to the continuing aftershock of COVID-19, the war between Russia and Ukraine and monetary tightening," Koo said. "Considering the comprehensive domestic and global trade environment, next year's exports and imports are expected to decrease compared to this year."
According to KITA, next year's exports will decrease by 4 percent to $662.4 billion due to economic slumps in major countries, and imports will decrease by 8 percent to $676.2 billion due to the domestic economic slowdown and falling oil prices. A trade deficit is expected next year, as imports decrease more than exports for a deficit projected to reach $13.8 billion.
Exports of semiconductors, which are the main driver, are expected to decrease by 15 percent due to a drop in their unit prices and a decrease in demand for IT devices. Exports in the petrochemical sector are also expected to decline by 9.4 percent due to reduced demand in China, Korea's largest export market.
"The unit price of DRAM chips has fallen by more than 20 percent this year, and global IT demand is expected to slow down next year as well. If energy prices stabilize next year, the unit price of petrochemical products exported after refining and processing energy will also go down," said Jo Sang-hyeon, head of the Institute for International Trade at KITA.
In addition, KITA estimates exports and imports for this year to be $690 billion and $753 billion, up 7.1 percent and 19.5 percent, respectively, compared to last year.
This year, Korea's exports continued to grow quantitatively despite difficult conditions, and the country's world ranking rose one level to sixth this year.
The gap with Japan, the world's fifth-largest exporter, has also narrowed to the lowest level ever, and KITA has evaluated that Korea has virtually risen to the ranks of the top five exporting countries, excluding the Netherlands, an intermediate trading country.
However, as imports have soared this year due to energy inflation, the country is expected to turn a trade deficit for the first time in 14 years, reaching an annual deficit of $45 billion.
"As exports increased sharply in the second half of last year, export growth seems to be slowing down in the second half of this year due to the relative base effect." Cho said.
However, if the global uncertainties ease, Chairman Koo says the trade environment could recover rapidly.
"If uncertainties in the global economy, such as the end of the Russia-Ukraine war, are resolved quickly, the possibility of a greater-than-expected recovery in our trade is possible." he said.
