[THE INVESTOR] South Korea’s export and import prices fell last month for the first time in three months due to falling oil prices and the won-dollar exchange rate, according to the Bank of Korea on Friday.

The export price index stood at 78.8 in July, down more than 2 percent from 80.6 in June, while the import price index came to 75.85, down about 2.8 percent from 78.03 in the same period. The decrease rate of the import price index in July reached the highest in nine months.

The appreciation of the Korean won, along with the falling oil prices, led both trade indices to decline, the central bank noted.

The won-dollar exchange fell from 1,170.50 won in June to 1,144.09 won at the end of July, and crude oil prices fell to about $42 per barrel from over $46 in the same period.

Low oil prices can be of both advantage and disadvantage to an economy as low energy prices can decrease production costs, enabling companies to manufacture and sell their goods at cheaper prices. However, it can affect consumer prices and weaken demand.

The country’s current account surplus extended its record for the 52nd consecutive month in June, but the record surplus was mostly due to falling oil prices rather than an increase in exports over imports on global demand.

Exports in July fell more than 10 percent to reach $41 billion in July on-year, while imports decreased 14.4 percent to reach $33.3 billion in the same period, according to the Ministry of Trade, Industry and Energy.

The Bank of Korea, which cut its key base rate to a record low of 1.25 percent last June, projects the consumer price index to rise 1.1 percent this year, but the market remains skeptical, expecting it to miss its 2 percent target, even with fiscal and monetary stimulus.


By Park Hyong-ki/The Korea Herald (hkp@heraldcorp.com)