S. KOREA'S TRADE DEFICIT CONTINUES

[Anchor Lead]

Concerns mount over the Korean economy as the country’s trade balance has dipped in the red for the second month in a row. Export remains solid for now but even that may not be the case in the second half of the year.

[Pkg]

South Korea exported 61.52 billion U.S. dollars of goods in May. The second time the amount exceeded 60 billion dollars. But the nation’s import amount increased even more dramatically... resulting in a trade deficit for the second straight month. If the trade balance remains in the red in June, it would be the first three-month trade deficit for Korea since the global economic crisis of 2008. Soaring prices of raw materials is seen as the key driving factor. The nation set a record high coal import last month. Inbound shipments of crude oil and gas also increased substantially on-year. The import sum of agricultural products also jumped since the Russian invasion of Ukraine. The trade deficit recorded this year, up until May, amounted to roughly 7.85 billion dollars, the largest since the foreign currency crisis of 1997. More troubling is a gloomy outlook for the rest of the year. International oil prices are expected to rise even more in the coming months, leading to a projection that Korea’s trade deficit may reach 15.8 billion dollars this year. Some experts warned of the dangers of seeing only some of the positive export figures of late. As of April, Korea’s export amount in U.S. dollars increased by more than 10% compared to a year ago, but the export volume decreased by 0.4%. Once the inflation factor is taken out, the future of the exporting sector which has been propping up the Korean economy may not be that rosy.

[Soundbite] Joo Won(Deputy Dir., Hyundai Research Institute) : "It would be okay if product competitiveness drove up the export volume. But the current situation is caused by higher export prices. We can’t remain positive about exports because we never know when the export demand can fall."

The Bank of Korea reported that the nation’s actual GDP grew a mere 0.6% in the first quarter. Spending and investment all suffered, lowering the growth rate by 0.7% points from the previous quarter.