S. Korea's trade terms dip to record low in Q3

SEOUL, Nov. 13 (Yonhap) -- South Korea's terms of trade deteriorated to the lowest level in over 20 years in the third quarter on soaring oil and raw material costs, the central bank said Thursday.

The country's net terms-of-trade index for goods fell 13.8 percent on-year to 78
in the July-September period, according to the Bank of Korea (BOK). The index
declined to the lowest level since 1988, when the BOK began to compile related
data.
The index is calculated by dividing the export price index by the import price
index. The base year is 2005 with a benchmark index of 100.
"Although oil prices have been on a downside path since peaking in July, falls in
oil prices in August and September were not reflected in per-unit import prices
for the third quarter. That's why the terms of trade worsened in the third
quarter," an official at the BOK said. "In the fourth quarter, the trade terms
may improve, given retreats in oil and raw material costs."
Crude oil prices have been heading downward since peaking at almost $150 per
barrel in July. South Korea, the world's fifth-largest crude buyer, relies
entirely on imports for its oil needs.
Higher oil prices helped increase export prices of petrochemical products made in
Asia's fourth-largest economy, but in the third quarter, per-unit import prices
grew at a faster pace than per-unit export prices, the BOK said.
The data comes as the South Korean economy grew 0.6 percent on-quarter in the
third quarter, the slowest growth in four years, due to faltering domestic demand
and lagging export growth.
The BOK slashed its key interest rate Friday for the third time in a month to
bolster the slowing economy. In a monthly policy meeting, the BOK lowered the
benchmark seven-day repo rate by a quarter percentage point to 4 percent, the
lowest level since 2006, cutting a combined 1.25 percentage point in the span of
a month.
sooyeon@yna.co.kr
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