Export Payability Fell for Two Consecutive Years

The export payability, which domestic companies can make through the trade with foreign companies, is deteriorating. Since the export price is dropping faster than the import price, import materials, which can be imported after exporting goods, are decreasing.

The Bank of Korea (BOK) said yesterday that the terms of trade deteriorated by 9.6 percent during the second quarter compared with the same period last year. Therefore, the terms of trade deteriorated for two consecutive years since the second quarter of 1999.

The terms of trade, indicating the amount of imports that can be purchased with one unit of exports, is an index that that estimate the export payability. The BOK explained that the terms of trade was 67.0, which fell by 9.6 percent compared with the second quarter of last year (74.1) because the unit export price dropped by 13.9 percent, while the unit import price dropped 4.8 percent.

The BOK said that the terms of trade deteriorated led by falls of the unit export price of semiconductors and information technology products. The deterioration of the unit export price was particularly accelerated in the fourth quarter of last year when the unit export price began to fall.

In terms of quantity, the amount of exports rose only slightly by 3.3 percent on the slackened demand for light industry items and a slowdown (10.9 percent) in the export of heavy chemical industry items. This 3.3 percent figure was a record low since the 1.6 percent growth recorded in the first quarter of 1999, said the BOK.

Regarding imports, while more consumer goods were imported, imports of raw material and capital goods (-15 percent) fell 7.9 percent compared with the first quarter of last year due to declining exports. This was the first time that imports fell since the fourth quarter of 1998 (-15 percnet).

Lee Heon-Jin mungchii@donga.com