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South Korea posted a current account surplus for the 18th straight month in July on export growth, the central bank said Thursday, providing buffers against potential capital outflows.
The current account surplus reached US$6.77 billion in July, down from $7.24 billion the previous month, according to the Bank of Korea (BOK). The current account is the broadest measure of cross-border trade.
The smaller surplus in July mainly came as spending on overseas travel increased during the summer vacation season, the bank said.
But Korea has maintained the current account surplus since February 2012, the longest surplus run since the April 2003-March 2005 period. The combined surplus amounted to $36.55 billion in the first seven months of this year.
In July, the BOK revised up its 2013 current account surplus estimate to $53 billion from the previous $33 billion. If realized, the full-year surplus would be a record high, topping last year's $43.14 billion.
The current account data is giving solace to South Korea at a time when some emerging markets, including India and Indonesia, are suffering from foreign capital outflows and subsequent currency depreciation, sparked by speculation over U.S. monetary stimulus tapering.
South Korea is differentiating itself from such troubled emerging markets as the current account surplus and the accumulation of foreign exchange reserves are serving as a buffer against external funding risks.
The BOK said that Korea is likely to post a smaller current account surplus for August on a seasonal factor, but it is expected to keep the underlying trend of the surplus due to export gains.
"There would be no difficulty in achieving the 2013 surplus target if (external) shocks do not crop up," Jung Young-taek, the director general of the BOK's economic statistics division, told reporters.
Jung also said that foreign investors' net purchase of local stocks and bonds continued in August.
"There are no signs of cross-border capital outflows amid speculation over U.S. stimulus tapering as Korea's economic fundamentals are deemed sound," he added.
The balance of Korea's goods posted a surplus of $5.68 billion in July, larger than the surplus of $5.02 billion in June.
In July, overseas shipments rose 3.8 percent on-year to $48.39 billion and imports gained 3.5 percent to $42.71 billion.
The service account, which includes outlays by South Koreans on overseas trips, posted a surplus of $357 million last month, compared with the surplus of $1.18 billion in June.
Meanwhile, the capital and financial account, which covers cross-border investments, posted a net outflow of $7.33 billion in July, compared with a net outflow of $4.9 billion the previous month, the BOK said.
Last month, foreign investors bought local stocks and bonds, causing such investment to post a net inflow of $4.23 billion.
The BOK earlier said that the 2013 current account surplus is likely to account for some 4.5 percent of the economic growth, up from 3.8 percent in 2012.
Source: Yonhap News (Aug. 29, 2013)