Trade surplus down sharply in August

By Kang Seung-woo

Korea’s current account dropped to a four-month low in August following a fall in exports due to a slowdown in overseas demand, the Bank of Korea (BOK) said Wednesday.

But it predicted that the surplus will expand again next month.

The central bank said the current account recorded a surplus of $2.07 billion last month, down from a revised $5.82 billion in July.

The current account is the broadest measure of trade that reflects the movement of goods and services.

Although the figure has kept Asia’s fourth-largest economy in the black for the seventh straight month, the surplus was the smallest since April, when it marked $1.42 billion.

The country’s balance of goods posted the smallest surplus since February after taking a sharp fall from a record $7.16 billion to $3.69 billion, as overseas shipments declined.

Exports increased 27.8 percent year-on-year to $38.6 billion in August while imports advanced 29.8 percent to $35 billion.

The service account, which covers the flow of travel and transport costs, registered a deficit of $1.78 billion, up from $1.5 billion the previous month.

The shortfall in the travel account, an element of the service account, fell to a two-year low after chalking up $952.7 million, as overseas travel increased amid the summer vacation season and the local currency’s strength.

“The shortfall of the travel account is projected to reach $8 billion to $9 billion for the whole year,” Lee Young-bog, head of BOK’s balance of payments statistics team, said at a press conference.

Meanwhile, the capital account, which tracks cross-border investments, scored a net outflow of $203.3 million in August, a turnaround from a net inflow of $201.2 million in July.

The current account surplus in the first eight months was tallied at $19.6 billion and it is expected to crack the BOK’s yearly prediction of $21 billion in September on the strength of rising shipments.

The BOK revised up its projection for the 2010’s current account surplus to $21 billion from $10.5 billion thanks to strong exports in July.

“Despite reduced working days due to the Chuseok holiday, the country is forecast to see a substantially large surplus for September,” Lee said.

“In September, the cumulative surplus is likely to top the BOK’s full-year surplus prediction of about $21 billion.”