Korea’s trade balance remains positive for two straight months on car exports

[Photo by Han Joo-hyung]

South Korea’s trade balance has maintained a surplus for the second consecutive month, driven by a significant reduction in energy imports owing to the decline in international oil prices. Additionally, strong automobile exports have played a crucial role in supporting the surplus, despite a slowdown in the semiconductor industry and lackluster exports to China.

In addition, there are promising signs of a gradual recovery in the semiconductor sector, creating optimism that the trade surplus will continue to stabilize as we approach the year‘s end.

According to the data released by the Ministry of Trade, Industry, and Energy on Tuesday, the trade balance recorded a surplus of $1.63 billion last month. This marks a remarkable improvement from the previous year, when the monthly trade balance remained negative for 15 consecutive months, finally turning positive in June with a surplus of $1.13 billion. As a result of this positive trend, the cumulative trade deficit for the year-to-date through last month has slightly decreased to $24.84 billion.

The trade surplus in July was primarily attributable to robust automobile exports and reduced energy imports. Despite an overall decline of 16.5 percent in exports compared to the previous year, the automobile sector exhibited resilience. Last month’s exports totaled $50.3 billion, with automobiles leading the way. The value of automobile exports reached a record high of $5.9 billion in July, reflecting a substantial 15 percent increase from the previous year. Among these exports, electric vehicles (EVs) stood out with an impressive surge of 69.5 percent, amounting to $1.37 billion.

On the other hand, exports of semiconductors, which constitute the country’s primary export product, experienced a significant decline of 33.6 percent compared to July of the previous year, reaching $7.44 billion. The decrease can be attributed mainly to lower product prices. Additionally, petroleum products (-42.3 percent), petrochemicals (-24.5 percent), steel (-10.2 percent), and wireless communications (-15.3 percent) also witnessed declines in their export figures.

Looking at export destinations, major trading partner China experienced a decline of 25.1 percent in imports from South Korea, while the United States (-8.1 percent), ASEAN countries (-22.8 percent), and Europe (-8.4 percent) also recorded decreases in imports from the country. Semiconductor exports to China experienced an even more substantial decline of 40.8 percent, which surpasses the overall semiconductor export drop of 34 percent.

Imports totaled $48.71 billion last month, marking a decline of 25.4 percent from the previous year. The reduction in international energy prices significantly impacted three major energy imports, namely crude oil (-45.8 percent), gas (-51.1 percent), and coal (-46.3 percent), leading to a combined decrease of 47 percent in their import values compared to the same period last year.

“The trade surplus has been sustained due to the continued strength in automobile exports and signs of recovery in the semiconductor industry. To further bolster export expansion, strategic industries focusing on high-tech sectors will be supported, and efforts will be made to attract investments,” said the Minister of Trade, Industry, and Energy Lee Chang-yang.

Experts predict that the direction of exports in the second half of the year will largely depend on the performance of the semiconductor industry and the recovery of exports to China. In July, semiconductor exports amounted to $7.43 billion, showing a gradual increase since January. Should this positive trend persist, there is a high likelihood that exports will return to a positive trajectory by the end of the year.