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Korea suffers record-high trade deficit in January amid falling exports

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Trade shortfall expected to continue through 1st half of 2023

By Lee Kyung-min

Korea registered an all-time high trade deficit of $12.69 billion (15.62 trillion won) in January, marking the 10th consecutive month of deficits, which were brought on by surging energy imports and plunging exports, the trade ministry said Wednesday.

Experts say the recent slowed growth of exports will continue at least during the first half of this year, as global consumers buy fewer Korean-made goods, including semiconductors.

Further exacerbating the grim outlook are elevated energy prices that are showing no immediate signs of relenting due to Russia's prolonged invasion of Ukraine. Korea relies on imports to meet over 93 percent of its energy needs.

Data from the Ministry of Trade, Industry and Energy showed exports fell 16.6 percent from a year earlier to $46.27 billion in January. This is a far sharper drop compared to the 2.6 percent year-on-year decrease in imports which came to $58.9 billion.

January's steep trade deficit accounts for 27 percent of last year's total $47.4 billion trade shortfall. This is the first time the monthly figure topped the $10 billion mark since 1956 when the ministry began compiling related data.

Former Seoul National University economist Lee In-ho said that the deficit is likely to widen in the months to come.

"Macroeconomic conditions do not bode well for the economy," he said. "The rapid increase in borrowing rates, overall sustained high prices of goods and living expenses as well as Russia's invasion of Ukraine are all risks that will not produce a dramatic shift any time soon."

Whether and by how much China eases COVID-19 restrictions will be among the key determinants related to the pace of economic recovery.

"China is the largest chip importer and is the largest global market. Spending should be able to recover in line with eased quarantine policies, but nothing can be said for certain now," Lee said.

The slowdown in exports was led primarily by declining unit prices of semiconductors and increased product stockpiles, amid an overall weakening of global market demand. Also at play was the reduced level of exports of Korea's semiconductors to China, which fell 46.6 percent last month. Semiconductors account for about a fifth of Korea's total outbound shipments.

Exports began to register year-on-year decreases in October of last year and have continued on a downward trajectory for four straight months.

Chip exports dropped 44.5 percent last month from a year earlier, greater than the 29 percent decrease logged both in November and December of last year. The decline was 17.4 percent in October of last year.

The price of DRAM memory chips was around $1.81 last month, about half the level seen in January and April at $3.41.

Other than chips, exports of petrochemicals, steel, automobiles, displays and biohealth products, declined between 16 to 33 percent.
Lee Kyung-min lkm@koreatimes.co.kr


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