Current account in black for yet another month

Korea reported a current-account surplus of $5 billion in November, the 81st month in positive territory.

According to the Bank of Korea on Tuesday, the current account totaled $5.06 billion, the latest monthly surplus in a series that began in March 2013. But in size it was the smallest since April 2018, when the current account surplus was $1.77 billion.

Compared with the same month last year, the surplus is down 32 percent. It is also down from October 2018, when the surplus totaled $9.19 billion. The central bank cited a sharp drop in the growth of export as the primary reason.

Exports in November were only up 0.5 percent year-on-year to $51.7 billion. In a statement, the central bank said the unit prices of major export goods, such as semiconductors and petrochemical products, have fallen as global economic growth slows.

The bank’s report was released on the same day Samsung Electronics announced an earnings shock, with the company reporting the smallest quarterly operating profit in seven quarters on falling semiconductor prices.

Concerns are increasing that the semiconductor market is at the end of the latest super cycle.

According to DRAMeXchange, a semiconductor research company, DRAM prices in October last year fell more than 15 percent month-on-month and dropped 1.64 percent in November. The situation is seen getting worse this year, with DRAM prices expected to fall more than 10 percent in 2019’s first quarter.

Semiconductors have played a significant role in the nation’s exports, accounting for roughly 21 percent of the total. But semiconductors are not the only drag on exports. General trade uncertainty is also contributing as China and the United States remain in conflict.

Imports grew 9.3 percent year-on-year to $43.7 billion largely on rises in international crude oil prices.

While the November trade surplus totaled $7.97 billion, it was the smallest since February 2018 ,when the surplus came in at $5.93 billion. It was also a 27.5 percent drop from October’s $11 billion surplus.

The shrinking current-account surplus suggests slower economic growth going out.

Korea’s current-account surplus has been one of the indicators referenced by the government as it argues that fundamentals are strong despite rising interest rates and volatile stocks globally.

While the Moon Jae-in government celebrated record-breaking annual exports of more than $600 billion and national income per capita exceeding $30,000 at the end of last year, the numbers have not been cause for celebration as consumption and investment have been weak.

Statistics Korea reports that retail sales fell 0.5 percent in the third quarter when compared to the previous quarter, a sign of contracting consumption.

Corporate investment in machinery and facilities in the third quarter, when compared to the previous quarter, dropped 6.2 percent after falling more than 11 percent quarter-on-quarter in the second quarter.

“Facility investment falling for six months consecutively is the longest drop since the IMF financial crisis [of the late 1990s],” said Hong Joon-pyo, a researcher at Hyundai Research Institute. “It shows how companies see the economy: dark.”

The service account continued in deficit, at a negative $2.29 billion, with the travel account at minus $1.27 billion.

This was an 18-percent improvement from the $1.55 billion deficit a year earlier. The improvement in the travel deficit was largely attributed to a fall in Koreans traveling aboard.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]