Current account surplus goes on for 44th month
According to the Bank of Korea on Wednesday, the country’s current account surplus stood at $8.96 billion in October, bringing the surplus rally to a new record of 44 consecutive months.
The October surplus shrank almost 15 percent compared to the previous month, when it recorded a $10.5 billion excess. However, when compared to a year ago, it was $220 million more, or 2 percent larger.
The accumulated current account surplus in the first 10 months amounted to $87.9 billion, almost 32 percent larger than the $66.7 billion surplus accumulated during the same period last year.
At the same pace, the current account surplus could once again break the annual record set last year when it stood at $89.4 billion, a 10.2 percent increase year on year. The Korean central bank projected the annual current account surplus for this year will exceed $110 billion.
There is concern, however, that the October surplus was not completely due to exceptional growth in the economy but rather a sharper decline in imports, which can be seen either as companies cutting back on their investment or consumer spending diminishing.
Considering the government’s policies to push various discount events, including Korea’s own Black Friday, to encourage consumption, it could mean the industrial production of companies was probably the biggest cause.
According to Statistics Korea on Monday, industrial output in October saw the sharpest drop in the past nine months. It fell 1.3 percent compared to the previous month. The last time industrial output has fallen so much was in January, when it tumbled 1.9 percent from the previous month.
Consumption saw the biggest increase in nearly five years. Retail sales increased 3.1 percent in October compared to the previous month, the biggest increase since the 4 percent recorded in January 2011.
According to the central bank, the trade account surplus, which takes up the biggest portion of the current account surplus, was $10.7 billion in October. Although this is smaller than the $12 billion in September, it was 35 percent more than the $7.98 billion recorded a year ago.
Exports in October were $47.4 billion, a fall of 7 percent compared to a year ago. But imports tumbled nearly 15 percent to $36.7 billion.
The central bank, however, continued to dismiss accusations that the surplus was a result of recession as it did in previous months.
“The reason the current account surplus is so huge is largely because trade conditions have improved on the back of falling crude prices that resulted in a sharper drop in imports by value,” said Park Seung-hwan, head of the BOK’s financial statistics department. “When you look at exports by volume, exports grew 2.1 percent while imports saw a 6.1 percent increase year on year.”
Information telecommunication devices such as smartphones were the only exported goods that saw year-on-year growth, while other major export goods, including computer chips and automobiles, declined. Petrochemicals and shipbuilding saw the biggest plunge.
Exports of information telecommunication devices expanded 35.1 percent to nearly $5 billion. Automobile exports, which grew 0.5 percent in September, fell 2.2 percent to $3.5 billion. Computer chips that have enjoyed stable growth in the past months, including a 0.9 percent increase in September, dropped 7.3 percent in October.
But petrochemical exports plummeted 45.1 percent, while shipbuilding saw a greater fall of 63.2 percent.
Exports to major markets have all declined, including the United States (-11.5 percent), Japan (-25.7 percent), Europe (-12.5 percent) and China (-8 percent).
Meanwhile, the service account saw its deficit expand from September’s $1.73 billion to $1.99 billion in October. The travel account, which is under the service account, saw its deficit grow from $710 million in September to $853 million a month later, as more Koreans traveled abroad.
The primary income account surplus shrank from $737 million in September to $594 million in October, with foreign investors withdrawing their investments.
BY LEE HO-JEONG [firstname.lastname@example.org]
with the Korea JoongAng Daily
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