More intensive steps needed to tackle looming crisis
The nation's trade shortfall reached $3.77 billion in September, logging a deficit for the sixth consecutive month. This is the first time since 1997, just before the Asian financial crisis, that Korea posted a trade deficit for six straight months. The aggregate shortfall reached a record $28.9 billion in the first nine months of this year. Should the current trend continue, the deficit is expected to amount to $48 billion by the end of the year, according to the Korea Economic Research Institute, Saturday.
The soaring shortfall has been mainly due to surging global energy prices. The imports of energy resources such as crude oil, gas and coal soared to $18 billion in September, up 81 percent from a year earlier. The plunging value of the Korean won against the U.S. dollar coupled with the spike in energy prices has widened the deficit.
The trade shortfall arising from soaring energy prices has been a common phenomenon in major nations with heavy reliance on energy imports, such as Japan, Germany and France. Yet, what is more serious for Korea is the sluggish overseas sales of its major export items, particularly semiconductors. The outbound shipments of semiconductors, which have been buttressing the Korean economy, have continued to dwindle in the last two months.
Exports of chip products decreased amid lackluster global sales of information technology (IT) products paired with a continued drop in the prices of NAND flash and DRAM products. As semiconductors account for 20 percent of the nation's entire outbound shipments, concerns are growing that the nation's economy will suffer a grave setback should the sales remain sluggish.
Worse still, shipments of the nation's major export items such as steel products and petrochemical goods declined sharply by 21 percent and 15 percent, respectively. Shipments to China, the largest export market for Korea, decreased for the fourth month straight. Given this, Samsung Electronics lowered its sales target for semiconductors by 32 percent from the previous one amid accumulating backlogs of relevant products.
The recent economic uncertainties in global markets have also been prompted by the protracted Ukrainian war, U.S. interest rate hikes and the lackluster Chinese market. As such, it is hard for Korea to find solutions to these problems soon. Furthermore, soaring household debt amounting to 1,900 trillion won ($1.32 trillion) and plummeting real estate prices are ticking time bombs for the national economy.
Despite the apparent looming crisis, Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho took flak by dismissing the possibility, casting doubts over the Yoon Suk-yeol administration's capability to tackle the economic problems. This is in contrast to other nations such as China, Japan and Taiwan that are taking proactive measures to curb the crisis by stabilizing their financial markets. The Yoon government needs to take more intensive steps to tackle the looming crisis effectively and preemptively. And the people should cooperate fully by, for instance, adopting belt-tightening measures to cope with the growing energy shortages.
The nation's trade shortfall reached $3.77 billion in September, logging a deficit for the sixth consecutive month. This is the first time since 1997, just before the Asian financial crisis, that Korea posted a trade deficit for six straight months. The aggregate shortfall reached a record $28.9 billion in the first nine months of this year. Should the current trend continue, the deficit is expected to amount to $48 billion by the end of the year, according to the Korea Economic Research Institute, Saturday.
The soaring shortfall has been mainly due to surging global energy prices. The imports of energy resources such as crude oil, gas and coal soared to $18 billion in September, up 81 percent from a year earlier. The plunging value of the Korean won against the U.S. dollar coupled with the spike in energy prices has widened the deficit.
The trade shortfall arising from soaring energy prices has been a common phenomenon in major nations with heavy reliance on energy imports, such as Japan, Germany and France. Yet, what is more serious for Korea is the sluggish overseas sales of its major export items, particularly semiconductors. The outbound shipments of semiconductors, which have been buttressing the Korean economy, have continued to dwindle in the last two months.
Exports of chip products decreased amid lackluster global sales of information technology (IT) products paired with a continued drop in the prices of NAND flash and DRAM products. As semiconductors account for 20 percent of the nation's entire outbound shipments, concerns are growing that the nation's economy will suffer a grave setback should the sales remain sluggish.
Worse still, shipments of the nation's major export items such as steel products and petrochemical goods declined sharply by 21 percent and 15 percent, respectively. Shipments to China, the largest export market for Korea, decreased for the fourth month straight. Given this, Samsung Electronics lowered its sales target for semiconductors by 32 percent from the previous one amid accumulating backlogs of relevant products.
The recent economic uncertainties in global markets have also been prompted by the protracted Ukrainian war, U.S. interest rate hikes and the lackluster Chinese market. As such, it is hard for Korea to find solutions to these problems soon. Furthermore, soaring household debt amounting to 1,900 trillion won ($1.32 trillion) and plummeting real estate prices are ticking time bombs for the national economy.
Despite the apparent looming crisis, Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho took flak by dismissing the possibility, casting doubts over the Yoon Suk-yeol administration's capability to tackle the economic problems. This is in contrast to other nations such as China, Japan and Taiwan that are taking proactive measures to curb the crisis by stabilizing their financial markets. The Yoon government needs to take more intensive steps to tackle the looming crisis effectively and preemptively. And the people should cooperate fully by, for instance, adopting belt-tightening measures to cope with the growing energy shortages.
