{"id":2199872,"date":"2023-01-11T13:05:00","date_gmt":"2023-01-11T13:05:00","guid":{"rendered":"https:\/\/www.nknews.org\/koreapro\/?p=2199872"},"modified":"2023-04-05T16:10:23","modified_gmt":"2023-04-05T07:10:23","slug":"trade-or-die-south-koreas-stellar-exports-cant-keep-up-with-fuel-costs","status":"publish","type":"post","link":"https:\/\/koreapro.org\/2023\/01\/trade-or-die-south-koreas-stellar-exports-cant-keep-up-with-fuel-costs\/","title":{"rendered":"Trade or die? South Korea\u2019s stellar exports can\u2019t keep up with fuel costs"},"content":{"rendered":"
Looking at South Korea\u2019s trade figures <\/span>reported<\/span><\/a> on Jan. 1, one can\u2019t help but be reminded of Lewis Carroll\u2019s brilliant \u201cThrough The Looking-Glass,\u201d where the Red Queen says to Alice, \u201cIt takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast!\u201d<\/span><\/p>\n The figures showed two new records, both good and bad, which ultimately offset one another. Let\u2019s start with the positive.<\/span><\/p>\n Last year, the <\/span>total value<\/span><\/a> of South Korean exports was a record $683.9 billion. That\u2019s 6.1% more than the previous year\u2019s figure of $644.4 billion, which was also a record for its time.<\/span><\/p>\n These are massive numbers. They translate to almost $2 billion in overseas sales daily, $78 million per hour, or over a million dollars every minute. It\u2019s a fantastic achievement.<\/span><\/p>\n This small country of 52 million people, with almost no natural resources, has long punched above its weight economically. The heady days of double-digit gross domestic product (GDP) growth may be over, but the ROK continues its steady ascent up the global rankings.<\/span><\/p>\n Regarding its GDP, after a long stint in the teens of the world\u2019s top 20 economies, <\/span>World Bank<\/span><\/a> data shows that Seoul finally reached number 10 in 2021.<\/span><\/p>\n As impressive as that is, the country\u2019s export performance is still more so. South Korea entered the world\u2019s Top 10 exporters some years ago and just keeps climbing. In 2021, it ranked <\/span>seventh<\/span><\/a> in the world, but it has gone up another notch to <\/span>sixth<\/span><\/a>.<\/span><\/p>\n In other words, the ROK now sells more to the world than four countries \u2013 France, Italy, Canada and the UK \u2013 in the G7, and in 2022, only China, the U.S., Germany, the Netherlands and Japan exported more goods than South Korea.<\/span><\/p>\n Seoul has come so far, so fast. Sixty years ago, the ROK was among the world\u2019s poorest nations. 1964 <\/span>marked<\/span><\/a> a milestone when exports first hit $100 million. Now its export totals are nearly 7,000 times that. Even allowing for inflation, the numbers are staggering.<\/span><\/p>\n EVERY SILVER LINING HAS ITS CLOUD<\/b><\/p>\n Yet these numbers still are not enough. The world is remorseless. This brings us to 2022\u2019s second and less pleasant record.<\/span><\/p>\n South Korea\u2019s stellar exports were insufficient to prevent it from suffering its <\/span>largest-ever trade deficit<\/span><\/a>: $47.2 billion. As quickly as its sales abroad rose, its overseas purchases soared even faster: up by almost a fifth to a whopping $731.2 billion. Exports just couldn\u2019t keep up.<\/span><\/p>\n Although trade deficits are a chronic fact of life for many countries, they\u2019re less familiar in Seoul. South Korea had not logged a trade deficit since <\/span>2008<\/span><\/a>. This allowed the ROK to build up hefty foreign exchange <\/span>reserves<\/span><\/a>, which it\u2019s already begun to need. Having peaked at over $460 billion in Jan. 2022, its foreign exchange reserves stood at $416 billion by Nov. 2022.<\/span><\/p>\n Two other unwelcome new records are worth flagging.<\/span><\/p>\n December\u2019s <\/span>deficit<\/span><\/a> of $4.69 billion is the first time South Korea\u2019s trade balance has been in the red for nine months straight since 1997. 2023 may extend this losing streak. To make matters worse, the ROK has not suffered a trade deficit of this <\/span>magnitude<\/span><\/a> since 1996.<\/span><\/p>\n It is not a mystery why South Korea\u2019s trade deficit has been hit so hard. The ROK\u2019s mighty industrial machine needs fuel to run, but the country has almost none of its own. Russia\u2019s invasion of Ukraine has forced everyone to pay much more for energy than before. Last year, the ROK\u2019s energy imports <\/span>jumped<\/span><\/a> by a whopping 40% to $190.8 billion. No amount of export prowess can cover a hit as big as that.<\/span>Power lines, May 2017 | Image: Pexels<\/a><\/em><\/p>\n RESULTS AND PROSPECTS<\/b><\/p>\n Unfortunately, prospects are also mixed for this year.<\/span><\/p>\n Relying on exports has served South Korea well in the past. So Seoul will most likely stick with its tried-and-true export strategy. However, the downside of overly relying on exports is that so much is beyond one\u2019s control.<\/span><\/p>\n For things to work in the ROK\u2019s favor, the health of the world economy is essential, but 2023 isn\u2019t looking good. <\/span>The Economist <\/span><\/i>predicts<\/span><\/a> a global recession is inevitable this year. While the <\/span>International Monetary Fund<\/span><\/a> (IMF) and others aren\u2019t quite so downbeat, they all expect a slowdown. Slowing economies import less than growing ones, obviously.<\/span><\/p>\n Contrary to a <\/span>Yonhap News Agency<\/span><\/i> headline<\/span><\/a> on Dec. 27, claiming that \u201cS. Korea eyes record exports next year despite gloomy outlook,\u201d the Ministry of Economy and Finance (MOEF) <\/span>predicts<\/span><\/a> that exports will fall by 4.5% or around $31 billion this year.<\/span><\/p>\n The good news is that import trends will outpace exports again, according to the Korea International Trade Association (KITA). KITA <\/span>expects<\/span><\/a> imports to contract by 8% this year. If they\u2019re correct, Seoul will still run a trade deficit but it will be much smaller, narrowing to $13.8 billion.<\/span><\/p>\n Yet KITA\u2019s prediction is based on the assumption that oil prices will fall. I\u2019m not so sure, as there are many unknowns and unpredictable factors here. No one knows how the war in Ukraine will develop, whether tensions between China and Taiwan might take a violent turn, or if some other unforeseeable crisis could develop, ratcheting up tensions and energy prices even further.<\/span><\/p>\n Indeed, the security situation around the Korean Peninsula itself could grow tenser given Kim Jong Un\u2019s ever-tougher nuclear <\/span>talk<\/span><\/a> and President Yoon Suk-yeol\u2019s robust <\/span>rhetoric<\/span><\/a> in response. But that\u2019s another story.<\/span><\/p>\n