Current account goes into deficit for first time in a year
Korea’s current account went into the red in April for the first time in 12 months as exporters took a hard hit from the global economic downturn resulting from the coronavirus pandemic.
Bank of Korea (BOK) data released Thursday showed a $3.12 billion current account deficit in April, the first deficit since last April's $390 million.
It was the worst deficit in more than nine years. In January 2011, Korea had a current account deficit of $3.16 billion.
“Seasonal dividend payments decreased compared to the same month last year, but the surplus in trade of goods dropped by a large amount,” the bank explained.
The goods account surplus was only $820 million in April, which was $4.7 billion or 85.3 percent less than a year ago, when the surplus was $5.6 billion.
Exporters were hit by depressed economies in their major trading partners including the United States and European Union, where the spread of the virus intensified in April. Exports of goods were $36.3 billion in April, a 24.8 percent year-on-year drop and the lowest figure since February 2010.
Korea’s services deficit increased by $150 million or 11.8 percent in April, reaching $1.4 billion.
The deficit in the tourism account decreased by $90 million or 22.7 percent compared to a year ago, reaching $340 million. The number of foreign travelers visiting Korea dropped by 98.2 percent in April on year but Koreans were also not traveling abroad. The number of outgoing Koreans dropped by 98.6 percent in the period.
The primary income account recorded a deficit as expected, as April is when dividends to foreigners are paid. The deficit was $2.2 billion in April, $1.9 billion or 45.2 percent less than the same month last year.
“Dividend payments were concentrated in April,” the bank explained. “However, as the profitability of Korea’s major companies deteriorated last year, the amount of dividend paid to foreign investors fell as well."
The bank forecast that the worst might be over for the current account.
It predicted a surplus in May as conditions for trade recovered and seasonal factors such as dividend payments will not be an issue.
“The trade account turned to surplus in May, posting $440 million, so I expect the current account balance in May to turn to surplus as well,” Moon So-sang, head of the central bank’s monetary and financial statistics division, said during a press briefing on Thursday.
Vice Finance Minister Kim Yong-beom wrote on his Facebook account Thursday that May will be hopeful.
"Recovery from the trade slump caused by Covid-19 will be slow, but it will gradually rebound to contribute to improvement in the goods balance," Kim said. "The trade account's transition to surplus in May [from a deficit in April] proves the expected recovery."
BY JIN EUN-SOO [firstname.lastname@example.org]