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The Largest Trade Deficit in South Korea’s History Has Been Announced

the largest trade deficit in south korea's history has been announced

Last year, South Korea experienced its largest trade deficit since 1956—a staggering $47.5 billion, according to the country’s customs agency statistics. This was an enormous increase from 1996 when the nation registered just a $20.6 billion trade deficit!

The Trade Deficit Can Be Seasonal

Unexpectedly, January exports plunged 16.6%, a $46.3 billion trade deficit greater than the anticipated 11.3% drop-off forecasts by experts predicted. Imports experienced a lower decrease of 2.6%, or $59 billion, contrasting with predictions for an expected 3.6%. This brought about a total trade deficit of $12.7 billion in January – which was higher than the Reuters survey economists’ expectation of $9

Following the report, the Korean won exchanged at 1,232.24 versus its U.S. dollar counterpart. South Korea’s economy and finance minister Choo Kyung-ho articulated in a meeting with officials on Wednesday that the world’s economic hardships may not be as severe due to China’s reopening and surprising growth from adjacent economies. Moreover, he explained that although January saw an elevated trade deficit generally caused by seasonal elements like energy imports for winter time or a diminished demand for chips resulting in worsened numbers, there is still hope left, given these external factors beyond our control.

the largest trade deficit in south korea's history has been announced

The Decrease In Demand For Chips And Smartphones Is A Big Factor

In the fourth quarter of 2022, global smartphone shipments experienced a dramatic decrease of 18%, with Canalys estimating 296.9 million units were shipped during this time period. Sanyam Chaurasia from Canalys noted that Asia-Pacific and Europe both had their lowest Q4 numbers in recorded history, even though the demand for smartphones remained relatively high throughout the year. Tuesday’s news revealed South Korean Samsung Electronics’ worst quarterly earnings in eight years while SK Hynix reported its highest-ever loss from last quarter, further supporting poor performances overall within the industry.

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