Current account sees deficit for first time in four months

Economy

Published: 07 Oct. 2022, 16:31

Current account sees deficit for first time in four months

Ships load containers at a port in Incheon on Sept. 2. [NEWS1]

Korea reported a $3.05 billion current account deficit in August, its first in four months.

The current account was in surplus to the tune of $790 million in July.

“Despite the upswing in exports of key products, like petroleum products and cars, growth of the IT sector and exports to China slowed,” said Kim Young-hwan, director of the Monetary & Financial Statistics Division at the Bank of Korea, at a press conference held in central Seoul on Friday.

He added that deficits in the use of intellectual property and in travel contributed to the final figure.

Exports in August stood at $57.28 billion, up 7.7 percent from a year earlier. Exports to China, however, dwindled 5.4 percent on-year in August.

Imports in the same month amounted to $61.73 billion, a 31 percent jump on year.

The faster rise in imports was due to high energy prices. Crude oil prices jumped 73.5 percent in August from a year earlier, according to the central bank.

The services account, which includes outlays by Koreans on overseas trips and transport earnings, showed a $770 million deficit in August, compared with a surplus of $290 million the previous month.

The travel account deficit stood at $970 million, while transport registered a $1.23 billion surplus.

Korea’s primary income account, which reflects wages as well as interest income and dividends, recorded a $2.24 billion surplus, largely due to an increase in dividend income.

“The current account acts as the basic safety-valve for external soundness” of the economy, said President Yoon Suk-yeol in a meeting held on the same day. “A considerable current account surplus is projected for this year, but we’ll be preemptively prepared to maintain such a surplus.”

The government will take measures to improve the current account balance across various sectors, including tours and the logistics industry. He added that the government will push to reduce imports by raising efficiency of energy usage.

To improve the structural stability of Korea’s current account, the government will announce measures to strengthen the competitiveness of Korea’s tourism, transport and content industries, said the Ministry of Economy and Finance in a statement Friday.

Exports of ships, displays and rechargeable batteries will also be boosted, it added.

To minimize the negative impact of current account volatility on the foreign exchange market, the government will “continuously put in multilateral efforts to stabilize the supply and demand for foreign exchange.”

To stabilize the won, the Bank of Korea said on Sept. 25 it has agreed to open a dollar-for-won currency swap line with the state pension fund to ease demand for dollars in the domestic foreign exchange market.

BY JIN MIN-JI [jin.minji@joongang.co.kr]