Korea's trade deficit largest since Asian financial crisis of 1997 despite strong exports

South Korea’s trade deficit sharply rose in May to stretch to the biggest so far in the year since the Asian financial crisis in 1997 as import cost of fuel and other commodities overwhelmed the country’s second biggest-ever monthly exports.

The Ministry of Trade, Industry, and Energy announced on Wednesday that the trade deficit in May hit $1.71 billion after imports surged 32.0 percent on year to $63.22 billion, surpassing 21.3 percent gain in exports of $61.52 billion. The red sharply widened from $210 million in March data.

The trade deficit for the first five months of this year reached $7.84 billion, the largest in 25 years since 1997 as monthly imports exceeded $60 billion for three consecutive months since March.

South Korea’s trade balance worsened due to its heavy reliance on energy and commodity imports.

In May, imports of the three main types of fuel - crude oil, gas, and coal – totaled $14.75 billion, up 84.4 percent from the same period last year. Coal prices jumped to an unprecedented high of $404.77 per ton, the highest ever monthly import price.

Agricultural prices also soared, amounting to $2.42 billion in imports last month, remaining in the $2 billion range for the third consecutive month.

Prices of non-ferrous metals such as aluminum and nickel recently declined on the U.S. Federal Reserve's interest rate hike and China's lockdown but remained higher than last year. Imports of aluminum and copper ore in May each increased 50.2 percent and 25.7 percent on year while imports of semiconductors each surged 28.0% percent 51.2 percent.

Korea fared better in trade than its peers such as Japan, Italy, and France that also have hefty reliance on energy and commodity imports, the Korean government said.

Exports of Asia’s fourth largest economy extended its growth streak for 19 consecutive months in May when its export value hit the second-highest ever. Exports of its petroleum products were the highest-ever while exports of petrochemicals, steel, health, semiconductors, and computers were the highest-ever May exports recorded.

Exports of all 15 mainstay items grew.

Petroleum products’ outbound shipments reached $6.41 billion, up 107.2 percent from a year ago. Semiconductor exports amounted to $11.5 billion, up 15 percent due to the increase in data center investment. Automobile exports surged 18.9 percent to $4.15 billion for the second consecutive month due to hiked exports of electric vehicles.

By region, exports from all nine major regions rose except for the Commonwealth of Independent States (CIS) countries such as Russia and Ukraine. Exports to the ASEAN region gained 23.0 percent, the United States 29.2 percent, the EU 23.5 percent, India 70.3 percent, and China 1.2 percent, the highest ever in May.

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