Net Capital Outflow Hits 10-Year High
By Lee Hyo-sik
Staff Reporter
Net capital outflow last month rose to a ten-year high of $5.8 billion, as foreigners dumped domestic stocks and bonds and took dollars out amid deteriorating conditions in the global financial market.
The capital account shortfall was the highest since net outflow of $6.37 billion in December 1997, according to the Bank of Korea Friday. The capital account tracks cross-border money movements, including stocks, bonds and loans.
The massive dollar outflow is expected to force financial companies to borrow money from overseas, increasing the country's external debts.
This could make the domestic financial market more vulnerable to external shocks. Foreign exchange reserves fell fast in recent months due the government's selling of dollars to stabilize the won's value to lower import costs and rein in consumer inflation.
The central bank said the current account deficit reached $2.45 billion last month after posting a $1.82 billion surplus in June, the first black figure since December last year.
The July deficit brought the current account shortfall to $7.8 billion over the first seven months of the year. Early last month, the bank revised upward its forecast for the annual current account deficit to $9 billion from its initial estimate of $3 billion, the first shortfall since 1997.
The trade account finished $300 million in the black, down sharply from a $3.5 billion surplus the previous month, as imports grew faster than exports. Exports grew 33.1 percent year-on-year to $42.3 billion last month, while imports jumped 46.1 percent to $42 billion.
The services account deficit topped $2.46 billion last month, up from a deficit of $2.13 billion a month earlier, due to more outbound travelers during the summer vacation.
The income account, which tracks wages for foreign workers and dividend payments abroad, posted a surplus of $240 million, plummeting from $590 million in the black in June, on increased dividend and interest payments to foreigners.
The won-dollar rate closed at 1,089 Friday, up 1.2 won from the previous day as importers rushed to buy dollars to clear month-end bills as the greenback gained strength worldwide, according to dealers.