Current account has best surplus

The current account balance in June recorded the largest surplus ever.

But the Bank of Korea didn’t celebrate because the cause was a fall in imports rather than an expansion of exports.

According to the BOK yesterday, the current account balance was in surplus $5.8 billion last month, knocking out the previous record of $5.4 billion in October 2010.

June’s record surplus was largely because of the surplus posted in the goods account, which nearly tripled from May’s $1.7 billion to $5 billion.

It was almost twice the size of the $2.7 billion recorded in the same month last year.

“Thanks to the expansion of the goods account surplus, the current account surplus was able to reach a new record,” said Kim Young-bae, a central bank official for statistics.

The current account surplus for the first half of the year amounted to $13.7 billion. This was more than the $8.1 billion marked in the first half of 2011.

The central bank’s target of reaching a $20 billion surplus by the end of this year may be realized. The BOK earlier this month revised its target and raised the annual surplus estimate from $14.5 billion.

The data released by the central bank wasn’t all rosy.

For five consecutive months since February, the Korean current account has been posting a surplus.

However, in most cases the surplus was a recession type in which imports fell sharper than exports grew.

In fact, exports haven’t expanded much.

Exports last month grew 1.5 percent on-month to $46.8 billion whereas imports nosedived 5.8 percent on-month.

Even when compared to a year earlier, exports contracted 1.7 percent while imports plummeted 7 percent.

The central bank cited falling commodity prices to explain the drop in imports.

As turmoil in the euro zone continues, there is concern over whether Korea’s exports would slump or crash.

Exports to Europe, which account for 10 percent of Korea’s overall outbound shipments, fell more than 19 percent in June, sharper than the 0.9 percent dip recorded in May.

Exports to China and the United States saw modest drops of 2.4 percent and 0.3 percent respectively.

This was good news considering that exports to China tumbled 5 percent on-year in May while shipments to the United States plummeted 8 percent that month.

The government has been emphasizing the need to stimulate the domestic market to reduce the nation’s dependence on exports.

However, the central bank denied that Korea’s current account surplus was a recession type.

“It is not accurate to claim that the current account surplus is a recession type,” claimed Kim at the BOK.

The official said that in a recession type surplus, both exports and inbound shipments of crude and raw materials needed for the manufacturing of products need to shrink.

“But when you look at the figures by volume, both exports and imports are persistently increasing,’ Kim said. “Exports by volume increased roughly 6.4 percent on-year while imports by volume grew 3 percent.”

He said if it was a recession-type surplus, it wouldn’t make sense for automobile exports to increase more than 21 percent on-year.

Meanwhile the service account surplus fell to $170 million last month compared to the previous month’s $1.59 billion as more Koreans went abroad on vacations.

By Lee Ho-jeong [ojlee82@joongang.co.kr]