Trade terms drop to over 3-year low in Q1

Korea’s terms of trade worsened to the lowest level in over three years in the first quarter as high crude and commodities prices hiked import costs, the central bank said yesterday.

The country’s net terms-of-trade index for goods came in at 75.1 in the January-March period, down 6.4 percent from a year earlier, the Bank of Korea said in a report. The number also equals the terms of trade index tallied in the fourth quarter of 2008.

The index is calculated by dividing the export price index by the import price index. The base year is 2005 with a benchmark index of 100.

The worsened numbers came as per-unit import prices grew at a much faster pace than per-unit export prices due to gains in crude oil and other commodity prices, the BOK said.

Per-unit export prices edged up 0.5 percent on-year to 106.3 in the first three months of this year while per-unit import prices gained 7.3 percent on-year to 141.7, it added.

Korea’s exports, which account for roughly half of its economic output, grew just 3 percent on-year in the first quarter, while imports rose 7.5 percent.

Prices of export goods were led by petrochemicals, autos and communication products, but higher oil costs increased the country’s import bills, effectively causing the country’s terms of trade to deteriorate.

Reflecting this, the country’s income terms-of-trade index, another gauge of trade terms that takes into account export volumes, contracted 0.1 percent in the first quarter from a year earlier.

Yonhap