S. Korea to post annual trade deficit this year: experts

By Lee Joon-seung

SEOUL, Oct. 1 (Yonhap) -- South Korea is expected post an annual trade deficit this year after staying in the black for over a decade, government and civilian experts said Wednesday.

The prediction comes after the country's balance of trade tally for the first
nine months of the year was announced earlier in the day.
The report by the Ministry of Knowledge Economy showed the country's
trade-related deficit topping $14.24 billion until the third quarter vis-a-vis a
surplus of $11.93 billion for the same period last year. Exports grew 22.9
percent, while imports jumped 34.1 percent in the cited period. The latter was
mainly caused by higher crude oil and raw material prices.
The latest tally dashed all hopes that Seoul may be able to recoup its deficit
with a comeback in the second half.
Seoul originally said a trade surplus of US$13 billion could be reached this
year, similar to 2007, but had revised this to $1.9 billion in the red in early
July, with some officials expressing hope that a rough balance could be reached
if crude oil prices fell sharply.
"The moderate deficit and possibility of a balance in trade was based in a drop
in crude oil prices and South Korea's economy growing by 4.7 percent," Chung
Jae-hoon, director general of the ministry's trade and investment office said.
"Crude oil prices have fallen more than anticipated, but domestic conditions and
those of the 15 largest global economies have become fluid," the official said,
adding that it may be realistically impossible to pull off a surplus of $14
billion in the remaining three months. Official sources have hinted that South
Korea's growth may fall to the lower 4 percent range this year.
"A new estimate on the balance of trade will be made around the end of the month
that will better reflect current circumstances like the Lehman Brothers debacle,"
the official said.
However, he said that since a surplus is expected for the remaining three months
of the year, the size of the deficit will be reduced.
"The deficit size will certainly not surpass the $8.45 billion reached in 1997,
when the country was rocked by its worst-ever financial crisis," he said.
Others generally echoed Chung's prediction, saying the drop in energy prices will
start to be felt in earnest in October.
The Institute for International Trade under the Korea International Trade
Association (KITA) said export growth may overtake imports in the coming months,
permitting a trade surplus to reach as high as $10 billion in the fourth quarter.
This view was supported by Jeon Young-jae, a senior analyst at Samsung Economic
Research Institute.
"Crude oil prices, which have hurt the balance of trade, should be resolved
starting this month, making it likely that the country will post a sizable trade
surplus in the fourth quarter," he said.
Some critics, meanwhile, said that although the drop in crude oil prices will
help, the fallout of the U.S. financial crisis could take its toll on consumer
sentiment in industrialized countries.
They claimed that if there is a fall in consumer spending in advanced
industrialized economies, exports to China may be hurt because the country buys
South Korean components to manufacture finished goods for the U.S. and European
markets.
Reflecting this, exports to China, which have increased by double digits in the
past, gained 7.3 percent on-year in September.