Trade Balance Deficit for Past Two Consecutive Months

The trade balance for February was in the red for the second consecutive month, as the cost of importing crude oil surged due to rising international oil prices. This two straight month deficit is the first time seen since October 1997.

According to the estimated record of exports and imports by the Ministry of Commerce, Industry and Energy (MOCIE) Sunday, exports increased to 13.55 billion won, up 22.5% from the same period last year, while imports rose 32% to 13.822 billion won.

As a result, the trade balance for February saw a deficit of 317 million won, 3.6 times that of January, which was 87 million won. Compared to the same period last year, the growing rate of imports for February exceeded 30%, the highest in two years and five months since September 2000.

“The surge of imports in February is largely due to the cost of importing crude oil which jumped 58% compared to the same period last year,” said Park Bong-kyu, Director General for Trade Policy at MOCIE. “The increased amount due to rising oil prices has reached 51 million won.”

In addition, cold weather this winter was one of the factors that increased imports of gasoline (248%), kerosene (260%), heavy oil (72%), and liquefied natural gas (LNG, 32%), further pressing the balance of payments.

The MOCIE analyzed that although the imports of capital goods like semiconductor equipment, automobile parts, and semiconductors rose 44%, they can be considered facility investments.

“The trade balance is expected to improve substantially in March thanks to the effect at the end of the quarter. But the prospect is not rosy if international oil prices do not stabilize,” Park said.

In particular, he added that there are many risky factors which will have a negative impact on the balance of payments, such as a possible war in Iraq, North Korea’s nuclear development program, and unstable exchange rates.

Meanwhile, exports of wireless communication units like mobile phones during February ranked first, outstripping that for automobiles and semiconductors for the first time.

Also, the price of DDR 256MB memory, one of the nation’s major export products, dropped to 3.76 dollars per unit in February, from 8.12 dollars last November.

Ja-Ryong Koo bonhong@donga.com