Central bank reports decline in terms of trade

Korea’s terms of trade worsened in 2012 from a year earlier as export prices fell at a sharper pace than import costs amid the global slowdown, the central bank said yesterday

The country’s net terms-of-trade index for goods came in at 87 in 2012, down 2.4 percent from a year earlier, according to the Bank of Korea (BOK).

But the 2012 data improved from a 10.9 percent year-on-year decline in 2011, it added. The index for January inched down 0.1 percent from a year ago.

The index is calculated by dividing the export price index by the import price index. The base year is 2010 with a benchmark index of 100.

From this year, the BOK will unveil data on trade terms on a monthly basis instead of a quarterly basis.

The deteriorated trade terms came as export prices sharply declined, led by falls in prices of handsets and other tech products while import costs decreased at a slower pace, the BOK said.

Korea’s export prices are affected by price swings of tech products as handsets and other tech products account for the bulk of the country’s overseas shipments.

Falls in export prices are a concern as the country’s exports, which account for about 50 percent of economic output, remain weak, hit by the protracted global economic downturn.

But the BOK said that despite setbacks in export prices, South Korea’s export volume increased last year.

The index measuring export volume grew 5.6 percent from a year earlier in 2012, slowing from a 13.9 percent on-year gain in the previous year, according to the central bank.

If taking export volumes into account, the country’s income terms-of-trade index, another gauge of trade terms, rose 3.1 percent last year from a year earlier.

The index measures how much can be imported with the total export value. The corresponding index for January gained 15.9 percent from the previous year. Yonhap