By Lee Hyo-sik
Staff Reporter
A widening deficit in the nation's services account is sounding the alarm in the education and tourism industries as the shortfall became the world's third largest last year on the back of a strong won and a record number of outbound travelers.
According to the National Statistical Office (NSO) and the Organization for Economic Cooperation and Development (OECD) Monday, Korea's shortfall in the services account stood at $18.7 billion in 2006, up from $13.6 billion a year earlier. The account covers flows of travel, transport and other services items in and out of the country.
Last year's figure is the third largest among the world's major economies after Germany and Japan. Germany, which topped the list as Europe's largest economy recorded a $48.7 billion shortfall in its services account, followed by Japan with $20.1 billion.
In contrast, the United States registered the largest service account surplus last year at $79.7 billion as its financial and other business-related services sectors attracted record amounts of investment from overseas. Britain came in second with a $53.7 billion, followed by Spain, one of the world's most popular tourism destinations.
``Encouraged by a strong won, an increasing number of South Koreans went overseas last year for travel, educational and other services, widening the account deficit and offsetting the surplus from exports,'' said Lee Yoon-sok, a researcher at the Korea Institute of Finance (KIF). The local currency appreciated 8.8 percent against the dollar in 2006 and has gained another 1.3 percent this year.
Lee said Korea and other countries, which posted red ink in the services account, are mostly manufacturing-oriented economies that power economic growth through exports. ``But the U.S., Britain and other nations with account surpluses have competitive financial services and tourism industries, attracting money and people from around the globe.''
He stressed Korea has to make an all-out effort to strengthen its competitiveness in the leisure and tourist-related sectors, as well as to improve its educational infrastructure to help reduce services account deficits.
``The won's continued strength against the dollar is encouraging more people to travel abroad, and this trend is expected to continue for the foreseeable future,'' he said.
In the first quarter of the year, the country's services account recorded a $6.18 billion deficit, the second largest in the world after Germany's $11.4 billion. The shortfall in the first half totaled $10.6 billion, up from $8.9 billion a year earlier.