South Korea's terms of trade worsened to the lowest level in more than two years in the second quarter as higher oil prices pushed up import costs, the central bank said Friday.

   The country's net terms-of-trade index for goods came in at 79.7 in the April-June period, down 7.5 percent from a year earlier, according to the Bank of Korea (BOK). The second-quarter figures marked the lowest level since the 75.1 tallied in the fourth quarter of 2008.

   The index is calculated by dividing the export price index by the import price index. The base year is 2005 with a benchmark index of 100.

   The worsened numbers came as per-unit import prices grew faster than per-unit export prices due to a sustained rise in oil and other commodity prices, the BOK said.

   Per-unit export prices rose 9.6 percent on-year to 111.8 in the second quarter while per-unit import prices jumped 18.6 percent to 140.3, it added.

   Since South Korea's trade terms hit a record low in the final quarter of 2008, they have steadily improved on the global recovery, which has revived overseas demand for Korean goods. Exports account for more than 50 percent of South Korea's economy.

   But higher oil costs jacked up the country's import bills, making the country's terms of trade deteriorate.

   If taking into account export volumes, the country's income terms-of-trade index, another gauge of trade terms, posted positive growth in the second quarter. The index measures how much can be imported with the total export value.

   The income terms-of-trade index came in at 139.7 in the second quarter, up 3.9 percent from a year ago. The second-quarter readings slowed from the 10.6 percent gain in the first quarter, it added.

Source: Yonhap News (August 12, 2011)