Halved Export Prices
The Bank of Korea announced on Nov. 16 that Korea’s export price index plummeted from 108.37 to 85.35 between the first quarter of 2009 and the third quarter of this year, while that pertaining to electrical and electronics products almost halved from 123.5 to 66.9 during the same period. These products include semiconductor chips, mobile phones and LCD panels, which are the main export items of Korea and have the highest level of contribution to the index, 36.7 percent to be exact.
The rapid decline in the index caused Korean manufacturers’ sales revenue to fall by 1.6 percent last year. That of 3,046 firms subject to external audits dropped by 5.7 percent and 6.3 percent year-on-year in the first and second quarters of this year, respectively. The central bank explained that the current situation is rooted in global demand contraction and low oil prices, which are structural factors likely to be lingering for a while.
Specifically, the demand contraction had a bigger impact than the other one. The export price index of chemical products, which account for 12.7 percent of the index and are directly affected by international oil prices, was 90.24 in the third quarter of 2015, 21.9 percent lower than the peak of 115.55 recorded in 2011 and very slightly lower than that of the first quarter of 2009 at 90.57.
Ironically though, the terms-of-trade index rose by 12.5 percent from a year ago to 101.63 in September, as the decline in import price (23.9 percent) exceeded that in export price (14.3 percent). This can be attributed to a drop in raw material prices, which is common to many countries around the world.