Korea's Terms of Trade Deteriorate for 24th Consecutive Month in March

Korea's terms of trade deteriorated for the 24th consecutive month as both the prices and volume of exported goods dropped in March.

According to the dollar-based trade index and trade conditions statistics released by the Bank of Korea on Oct. 26, Corporate Korea’s net barter terms of trade index stood at 83.01 in March. It has been on the decline for 24 months. This is the longest period of worsening trade conditions since the 28-month period from December 2017 to March 2020.

The net barter terms of trade index refers to the ratio of the price of one unit of exported goods to the price of one unit of imported goods, which is an indicator of how much goods Korea can import with one unit of export. At 83.01, the index is below 100, which means that exports had lower prices than imports. A fall in prices of major export items, including semiconductors, was the cause, the Bank of Korea explained.

The export volume index fell by 2.4 percent and the price index fell by 13.5 percent from a year earlier. Increases in transportation equipment, including automobiles (36 percent), coal and petroleum products (9.9 percent), and others cut the decline, but not in computers, electronic and optical equipment, including semiconductors (-15.7 percent). The dollar-denominated export price index also declined for the sixth consecutive month. This was blamed on a decrease in the amounts of exports of computers, electronic and optical equipment (-34.6 percent), and chemical products (-14.1 percent). The import volume index was the same as the previous month, while the import price index contracted by 6.6 percent due to drops in the prices of mining products (-9.7 percent) and computers, electronic and optical equipment (-12.4 percent).

The income terms of trade index, which indicates the total amount of goods that can be imported with the total amount of Korea's exports, descended by 7.4 percent year on year as both the export volume index (-2.4 percent) and the net barter terms of trade index (-5.1 percent) declined. This marked the 14th consecutive month of contraction.