South Korea hit by record trade deficit due to steep fall in semiconductor exports

By Park Yoon-bae Posted : February 1, 2023, 18:37 Updated : February 1, 2023, 18:37


SEOUL -- South Korea posted a record-high monthly trade deficit of $12.6 trillion in January due to a steep fall in exports of the country’s key items such as semiconductors, display panels, and steel and petrochemical products, the Ministry of Trade, Industry and Energy said February 1.
More seriously, the country suffered the trade shortfall for the 11th consecutive month. Such a long period of the deficit was unheard-of since Korea witnessed a deficit for 30 months till May 1997, just before the outbreak of the Asian financial crisis.
The ministry said that the unprecedented trade imbalance was caused by plunging exports of semiconductors and other major products as well as by a surge in imports of oil and gas. It also said that four consecutive months of an overall decline in exports also contributed to expanding the trade deficit.
The country’s exports plunged 16.6 percent year-on-year to $46.27 billion last month. Its imports, however, fell a mere 2.6 percent to $58.96 billion. The gap between exports and imports resulted in the sizable trade shortfall.
The export decline was on a four-month downward march. Overseas shipments dropped 5.7 percent in October, 14 percent in November and 9.5 percent in December. The setback was attributed to a global economic slowdown amid soaring inflation and high interest rates.
The ministry said that the sharp export fall in January was also caused by the base effect of a surge in overseas shipments in the same month of 2021.
Exports of semiconductors nosedived 44.5 percent to $6 billion last month from $10.8 billion a year earlier, driven by sluggish demand for and the falling prices of DRAM and NAND flash memory chips. The decline continued for the second straight month. Semiconductor exports usually account for about 20 percent of the country’s total exports.
Aside from semiconductors, display panels and steel products also shrank 36 percent and 25.9 percent, respectively. Petrochemical exports decreased 25 percent.
On the other hand, exports of ships skyrocketed 86.3 percent, boosted by a boom for eco-friendly vessels and high-valued ships. Automobiles and secondary batteries saw their exports climb 21.9 percent and 9.9 percent, respectively.
By country, exports to China, South Korea’s largest trading partner, plunged 31.4 percent in January, continuing the downward spiral for the eighth consecutive month. Exports to ASEAN countries and the United States fell 19.8 percent and 6.1 percent, respectively.
However, Korea's shipments to the Middle East, the country's strategic export market, and the European Union (EU) increased 4 percent and 0.2 percent, respectively.
South Korea's imports of crude oil, gas and coal were estimated at $15.8 billion last month, accounting for 26.8 percent of the country's total imports. The energy imports were partly responsible for the snowballing trade imbalance.
Trade and Industry Minister Lee Chang-yang said the government will take proper measures to expand the country's exports and reduce the soaring trade deficit.
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