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Trade deficit series… Deja vu during the currency crisis

Trade deficit series… Deja vu during the currency crisis
Trade deficit series… Deja vu during the currency crisis

Registered $3.77 billion last month

First six consecutive months of loss since 1997

Imports ‘snowballed’ due to high energy prices

An expected annual trade deficit of $48 billion

With a trade deficit of more than $3.7 billion last month, the International Monetary Fund (IMF) posted a trade deficit for six straight months for the first time since the 1997 Asian financial crisis. At this rate, this year’s trade deficit should more than double what it was before the financial crisis directly, which was the biggest in history.

The Ministry of Commerce, Industry and Energy announced on April 2 that the trade deficit registered US$3.77 billion last month. While exports stagnated, imports rose sharply, leading to a trade deficit. Exports last month were $57.46 billion, up just 2.8% from the same period last year. This is the smallest increase in nearly two years since October 2020 (3.9%). It is also a bad sign that the export growth rate has been in single digits for four consecutive months since June this year (5.3%).

Of the top 15 items, only five commodities, including petroleum products, automobiles and rechargeable batteries, saw an increase in exports. In particular, exports of semiconductors, the largest component, were down 5.7% year-on-year. Exports to China, the biggest market, also dropped 6.5%, extending the decline for the fourth month in a row. Exports also fell 0.7% to the European Union as concerns about an economic slowdown due to the protracted war between Russia and Ukraine spread. On the other hand, imports last month increased 18.6% year on year, reaching US$ 61.23 billion. Imports of crude oil, gas and coal, the top three energy sources ($17.96 billion), were largely affected by an increase of $8.05 billion from the same period last year. In particular, January-September crude oil, gas and coal imports increased by $67 billion from a year earlier, significantly exceeding the $28.88 billion trade deficit.

The deterioration of the trade balance is a common phenomenon in large countries that depend heavily on energy imports. Japan is running a trade deficit for the thirteenth consecutive month. France and Italy also suffer from deficits in their trade balances.

In the past, Korea ran a large trade deficit whenever an economic crisis occurred. Even just before the financial crisis, it ran deficits for six straight months and posted an annual loss of $13.3 billion in 2008, at the time of the global financial crisis.

The problem is that exports are gradually decreasing. Even earlier this year, the growth rate of exports was 15.5%, but dropped to 2.8% in August. He seems to be moving away from the government’s explanation that the trade balance could also turn into a surplus if energy prices stabilize.

Most institutions, including the Bank of Korea, expect the trade deficit to continue for some time. The crisis could be further magnified if Russia’s resource arming, such as cutting off gas supplies this winter, becomes a reality.

On the same day, the Korean Institute of Economic Research, part of the Federation of Korean Industries, predicted that the trade deficit will reach $48 billion this year. That’s more than double the $20.6 billion in 1996, before the Asian financial crisis, which was the biggest trade deficit in history.

The article is in Portuguese

Tags: Trade deficit series .. Deja currency crisis

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