Worrying indicatorsSouth Korea’s current account surplus hit a nine-month high in July. According to the Bank of Korea, the country’s current account posted a surplus of $6.96 billion, the highest since $9.35 billion in October 2018.
A record surplus in the primary income account as a result of an influx of dividend income from overseas investments and a shrunken tourism deficit owing to drastically decreased trips to Japan helped create the highest current account surplus in nine months since October 2018. The data is a relief for a country sensitive to its external accounts and what they signify.
Still, the backbone of the economy — trade — remained shaky. The trade surplus in goods shriveled to $6.19 billion from $10.79 billion a year earlier. Exports tumbled 10.9 percent in July and imports 3.0 percent on year.
Our trade-reliant economy has weakened as a result of global commerce taking a hit from the ongoing trade war between the United States and China and uncertainties in Europe from Brexit. Industrial activity is sluggish, partly due to weaker prices for semiconductors.
Japan’s trade restrictions on Korea also weigh on our manufacturing and exports outlooks. Korea’s current account could shift into deficit at any time. Income from overseas assets could be a one-time effect from a weaker Korean won versus the U.S. dollar and other currencies. In short, there are no upsides to the Korean economy for the time being.
The government’s role has become more important than ever. Authorities must examine weaknesses in the economy and remove the hurdles one by one. External volatilities like trade conflicts and Brexit cannot be helped.
But the government can do more to ease the Japanese risk. It can send an envoy or propose a high-level meeting to mend ties with Tokyo. Chanting a mantra of self-sufficiency in materials and technologies cannot bring about immediate results.
The government also should put more efforts into aiding the semiconductor industry to ensure sustainable manufacturing activity. Regulations must be removed. The government also must seriously contemplate whether policies like income-led growth are helping or hurting. There is not much time left.