Terms of trade in worst shape since 1988

Korea`s terms of trade fell to their worst level since 1988 due to a surge in import unit value amid soaring international oil prices. According to indices of foreign trade and terms of trade, released by the Bank of Korea (BOK) Friday, the net barter terms of trade index in Korea was 72.2 (based on 100 in 1995) last year, the lowest figure since 1988 when the central bank began calculating the indices using the present rules. The figure was off 12.4% from 82.4 in 1999 and the decline was the largest since 1988. The net barter terms of trade index indicates an import volume that allows the purchasing of goods from foreign countries using one export unit, and is calculated by dividing the export unit value index by the import unit value index.

The central bank attributed the deteriorating terms of trade mainly to a 14.4% surge in the import unit value amid soaring raw materials prices and hikes in international oil prices. The export unit value rose mere 0.3%. ``Although the export unit value has begun rising for the first time in five years, the import unit value surged at a more rapid rate, worsening the terms of trade,`` a BOK official said. ``If we exclude crude oil from the import unit value, the rate of decline in the terms of trade falls to 5.5%. Thus, there is room to improve the terms of trade if international oil prices stabilize.`` The terms of trade index fell from 100 in 1995 to 90.5 in 1996, 88.1 in 1997, 84.2 in 1998 and 82.4 in 1999.

[Yonhap]