Trade deficit hits record as imports surge and chip exports fall

Vessels with cargo docked a port in Busan on Thursday. Despite exports growing for 22 consecutive months, the country reported its biggest trade deficit yet due to record-breaking imports. [YONHAP]

The trade deficit hit $9.5 billion in August, a record, as imports of petroleum products surged and exports of semiconductors declined.

It was the fifth monthly trade deficit in a row, the first time this has happened since 2007, and was almost twice the shortfall recorded in July.

The news helped send the won to a fresh 13-plus-year low against the dollar and heightened the sense of urgency as Korea moves inexorably toward a crises driven by inflation, rising rates, slowing economies in the West and inventory gluts.

According to the Ministry of Trade, Industry and Energy on Thursday, exports rose 6.6 percent to $56.7 billion in August, continuing a trend of steadily increasing imports that has lasted for 22 consecutive months.

Imports were up 28.2 percent to $66.2 billion, a record.

In the first eight months of the year, the trade deficit was $24.7 billion, which beats any annual total ever. Unless the situation turns around suddenly, Korea will report its largest trade deficit ever in 2022.

"It would be difficult to expect transitioning to a trade surplus by the end of the year by recording a trade surplus in the remainder of the year," said Moon Dong-min, deputy minister for trade and investment.

Energy imports rose 92 percent on year as the price of fuels skyrocketed, the won fell, exports to China flagged and chip exports slowed.

Energy imports, including crude oil, gas and coal, were $18.5 billion. In the first eight months of this year. They were up 90 percent year-on-year to $125.2 billion.

Semiconductor exports fell 7.8 percent on year as demand weakened and prices fell, ending a 25 month run of increases. Exports of computers, displays and consumer electronics also declined.

Exports to China, which takes 25 percent of the total, fell 5.4 percent year-on-year to $13.1 billion.

Rechargeable battery exports were up 35.7 percent year-on-year to $940 billion. Exports to the U.S. rose 13.7 percent and to Europe 7.3 percent.

"The $9.5 billion trade deficit was largely due to the significant increase of the three energy source imports due to high energy prices and the increase in energy demand in summer," Moon said. "Additionally, the increase in imports of key materials that are necessary for our industries, including semiconductors and lithium hydroxide, also had an effect."

The latest trade report was released the day after the government announced support measures for the Korean trade.

It raised the ceiling on trade finance from state-owned financial companies to a record 351 trillion won. The maximum was raised from 300 trillion won, which was itself upped from 261 trillion won in July.

With the insurance limit raised, companies will be able to borrow more.

"What we can do is narrow the size of deficit by reducing trade risks through export policies despite the external factors," Moon said.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]