Energy prices more than doubled and imports hit record high of $63.6 billion
“Trade shaken when the Ukraine crisis prolongs… Primary product risk management such as raw materials”
In the first quarter of this year (January to March), the trade balance turned to a deficit of 4 billion dollars (regarding 4.87 trillion won). The trade deficit in the first quarter was the first in 14 years since the global financial crisis in 2008. Monthly exports in March achieved an all-time high, but energy prices more than doubled and imports increased even more to an all-time high. There are concerns that trade, which supports the Korean economy, might suffer if raw material prices continue to rise due to the Ukraine crisis.
According to the Ministry of Trade, Industry and Energy on the 1st, exports in March were $63.48 billion, up 18.2% from the same month of the previous year. It is the highest export performance in 66 years since 1956, when related statistics were compiled on a monthly basis. By item, semiconductors exported $13.12 billion, the highest ever. This is due to the increase in demand for semiconductors due to the spread of artificial intelligence (AI) and big data technologies. Petrochemical exports also reached a record high of 5.42 billion dollars. Petroleum products (90.01%), displays (48.4%), wireless communication (44.5%), semiconductors (38.0%), and steel (26.8%) increased significantly.
Imports last month also rose 27.9 percent to $63.62 billion, the highest on record. Energy source imports were $16.19 billion, more than double the import amount in the same month of the previous year ($7.72 billion). This is because energy prices such as crude oil (72%), liquefied natural gas (LNG, 200%) and coal (441%) soared from the same month of the previous year last month.
President Moon Jae-in on social network service (SNS) on the same day said, “Imports also recorded an all-time high due to a surge in global energy prices, but the trade balance is at a very good level compared to major countries. I think they will be upset,” he said. In fact, in the case of major countries’ trade balance, Japan suffered a deficit of 669.7 billion yen (as of February), France had a deficit of 8.03 billion euros (as of January), and the United States had a deficit of 84 billion dollars (as of February).
However, the trade balance, which showed a ‘sparkle surplus’ ($831 million) in February, turned to a deficit of $140 million once more in March. As of the first quarter, the trade balance was a surplus of $9.81 billion last year, but turned into a deficit of $30 million this year. It is the first time since 2008 that the trade balance in the first quarter posted a deficit.
If energy prices do not calm down as the Ukraine crisis prolongs, there are concerns that the trade deficit, which is considered the ‘growth engine’ of the Korean economy, may lead. If the price of raw materials continues to rise, the burden of import costs on domestic companies will increase, and this cost may be reflected in the price, which may reduce price competitiveness abroad. According to the Bank of Korea, Korea’s exports contributed 87.5% to economic growth last year.
Kim Kyung-hoon, a research fellow at the Korea International Trade Association, said, “There is a lot of room for energy prices to calm down due to the US-centered release of oil reserves, but the trade balance is uncertain because of the war situation. Risk management for primary products is necessary,” he emphasized.
Sejong = Reporter of the former special school [email protected]
