Invest KOREA

Korea’s current account surplus hit a record high in May at USD 8.64 billion for 16 consecutive months.

According to a report on the international balance of payments in May released by the Bank of Korea (BOK) last week, Korea’s current account in May increased by USD 4.71 billion from April’s USD 3.93 billion to USD 8.64 billion.

It even exceeded the trade surplus of USD 6.91 billion last November.

The current balance turned to a surplus of USD 557.3 million in February of 2012 from a trade deficit of USD 968.8 million in January of 2012, and continued to show a surplus for 16 months.

Kim Young-bae, an official from the Economic Statistics Department of the BOK, explained that the slowed growth of imports due to a drop in raw material prices led to the improved current account.

However, he noted that imports did not drop by more than 25 percent due to a sudden increase in exchange rates and import prices, as they did in the financial crisis and global economic crisis, adding that the current account surplus is not due to a depression. He added that the import price index decreased by 9.6 percent year-on-year whereas it increased by 5 percent in terms of quantity, noting that consumption does not rise as prices drop.

The accumulated account surplus was at USD 22.54 billion as of the end of May.

The surplus of goods balance last month rose to USD 7.27 billion from April’s USD 3.54 billion. Exports also increased by 7.4 percent from last year at USD 49.59 billion (in terms of free on board). However, imports stood at USD 42.32 billion, a 4.8 percent decrease from the previous year.

Exports, in terms of customs, grew by 3.2 percent at USD 48.36 billion. It was backed by an increase in exports of information communication devices (32.1 percent), semiconductors (17.1 percent) and automobiles (7.9 percent).

Exports to the United States grew by 21.6 percent compared to the previous year. Exports to Central America (17.1 percent) and China (16.6 percent) also increased. However exports to the European Union, Middle East and Japan dropped by 14.0 percent, 13.4 percent and 11.6 percent, respectively.

Imports in May dropped by 4.6 percent at USD 42.45 billion (in terms of customs) from 2012. This was due to a 10.2 percent decrease in raw material imports despite increased exports of consumables (5.8 percent) and capital goods (5.1 percent).

Primary income account was shifted from April’s USD 1.09 billion deficit to a surplus of USD 190 million with improved income from dividends. Transfer income reached a surplus of USD 40 million.

The surplus from the service sector was decreased to USD 1.13 billion from USD 1.45 billion in April. This was due to an increased deficit from accounts from the royalties of intellectual property rights (USD -340 million from USD -90 million) and business service (USD 310 million from USD -140 million). The deficit from the tourism sector also grew, to USD 580 million from USD 450 million.

Financial accounts, which show capital inflow and outflow, jumped to USD 11.58 billion from April’s USD 2.57 billion.

Direct investment shifted to capital outflow of USD 1.48 billion from inflow of USD 300 million in April due to decreased foreign direct investment in Korea.

Security investment dropped to USD 1.17 billion from USD 1.92 billion in April due to increased foreign investment in stocks. Derivatives showed inflow of USD 650 million.

Other investment increased to USD 8.53 billion from USD 1.58 billion from the previous month. Reserve assets rose by USD 1.04 billion.

Capital accounts, which include payments for foreign real estate properties and relocation expenses overseas, showed a deficit of USD 20 million.

The BOK forecast that the account surplus in June will be less than that of May. The Economic Statistics Department of the BOK noted that there have been negative factors in the balance of invisible trade at the end of a half quarter, adding that momentum for a surplus will be maintained, although it will not be as strong as it was in May.

Regarding a forecast of minus export growth in June, the BOK noted that the growth is expected to drop by 1 to 3 percent and that exports will increase daily in June. It added that exports of USD 2.1 billion (daily average) will be maintained.


Source Text

Source: Newsis (June 27, 2013)

** This article was translated from the Korean.