Current account surplus worst in eight months

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Current account surplus worst in eight months

Korea’s current account surplus fell to the lowest level in eight months in December as the local currency’s ascent and reduced working days crimped exports, the central bank said yesterday.

The current account surplus reached $2.25 billion in December, sharply down from a revised record high of $6.91 billion in the previous month, according to the Bank of Korea. The current account is the broadest measure of cross-border trade.

The December data marked the smallest monthly surplus since April, but it marked the 11th straight month of surplus. The aggregate surplus hit a record high of $43.25 billion last year.

The BOK downplayed the impact of the won’s ascent on decreased exports last month, saying that reduced working days were the main factor. In December, there were three fewer working days than a year earlier, it said.

“The won’s gain had an effect of curbing exports last month. But the on-year falls in trade mainly resulted from reduced working days,” Kim Young-bae, the director general of the BOK’s economic statistics division, said at a press conference.

In December, exports declined 7.2 percent on-year to $44.44 billion and imports fell 5.5 percent to $42.41 billion.

If excluding the effect of having fewer working days, the value of exports per day grew 7.5 percent on-year and imports gained some 8 percent in December, Kim said.

The data came as the won’s ascent threatens to crimp Seoul’s exports, which account for about 50 percent of the economy.

The won rose 7.6 percent to the dollar last year, as foreign capital has flown into Korea amid quantitative easing by major economies.

Japan’s drive to weaken its currency through an open-ended asset-buying program has unnerved Korean policy makers as the move is putting upward pressure on the won.

As Korean automakers and tech firms vie with Japanese rivals in overseas markets, a stronger won is feared to hurt the price competitiveness of Korean products.

The BOK earlier said that Korea is expected to see a current account surplus of $32 billion in 2013, smaller than that of last year.

“The economic recovery is likely to increase imports of capital goods and raw materials this year, which will reduce the full-year surplus volume,” Kim added.

Analysts said the negative impacts of the won’s ascent on Korea’s exports are likely to be felt further this year.

“Whether Korea can achieve the full-year export target will depend on the recovery pace of the global economy as the won’s gain will hurt exports’ price competitiveness,” said Lee Sang-jae, a senior economist at Hyundai Securities.

Hit by falls in exports, Korea’s goods balance logged a smaller surplus of $2.03 billion in December, compared with a revised record high of $6.78 billion the previous month.

As evidence of the impacts of the won’s gain to the yen, Korea’s overseas shipments to Japan declined 16.9 percent on-year to $3.09 billion on a customs-cleared basis. Yonhap
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