Current account in surplus in March, April deficit possible

Park Yang-su, head of Bank of Korea's economics statistics department, speaks during a press briefing on Thursday.

Korea’s current account balance came in at $6.2 billion in March, its 11th consecutive month in surplus, Bank of Korea data showed Thursday.

The balance could deteriorate in April, the central bank said, as exports weakened from mid-March as a result of the coronavirus outbreak in the U.S. and European Union region.

Korea’s current account surplus rose by 23.6 percent year-on-year in March, going from $5.04 billion to $6.23 billion.

The balance on goods shrunk to $7 billion in March from last year’s $8.3 billion as exports to China, which was hit by the virus early, experienced a major slump.

Exports in March stood at $46.4 billion, a 3.3 percent year-on-year drop, while imports shrunk by 0.6 percent on year in March, going from $39.6 billion to $39.4 billion.

“Export to China decreased due to Covid-19 influence, but those to the United States and the EU weren’t affected as much, which is why the account for goods didn't budge much,” said Park Yang-su, head of the banks economics statistics department in a briefing Thursday.

The fall in the goods account was somewhat balanced by services. Balance in services went from a deficit of $2.1 billion in March 2019 to a deficit of $1.4 billion in March this year, owing to a shift in the intellectual property balance.

The intellectual property account deficit fell from $950 million in March last year to $550 million in the same month this year. Balance on travel deteriorated to a deficit $370 million from last year’s $170 million in the month of March.

Park warned that the current account for April is highly likely to record a deficit because of weak exports.

Korea’s Trade Ministry announced May 1 that trade account recorded a deficit for the first time in 99 months in April. Exports fell by 24.3 percent year-on-year to $36.9 billion. Imports dropped by 15.9 percent in April on year, resulting in a trade deficit of $950 billion.

“It is highly likely that the current account for April will record a deficit,” said Park. “Dividend payments to foreign investors also generally increase in April, and the amount of surplus in goods account has a high possibility of declining.” According to Park, more than 30 percent of dividend payments to foreign investors take place in April.

The last time Korea's current account has recorded a deficit was last April, when the figure stood at minus $390 million.

Korea’s account for primary income, which includes investment income, stood at $930 million in March, turning to surplus from a $610 million deficit in March last year.

“The balance for May will largely depend on trade account with dividend payments factored out,” said Park. “Korea may increase the import of capital and consumer goods as the country is relatively in good condition in regards to Covid-19, and it could act as a negative element for trade balance.”

BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr]