Current account surplus falls to 11-month low

By Kang Seung-woo

Korea’s current account surplus dropped to the lowest level in 11 months in January, as oil and commodity prices increased and overseas travel soared during the vacation season.

The central Bank of Korea (BOK) said that the surplus was $229 million last month, steeply down from $2.11 billion the preceding month. The current account is the broadest measure of trade that reflects the movement of goods and services.

Last month’s figure was the smallest since Asia’s fourth-largest economy posted a deficit of $363.1 million in February 2010.

There is a silver lining in that the country has extended its surplus streak to 11 months thanks to solid exports, which account for more than 50 percent of the Korean economy.

Korea recorded the fourth-largest current account surplus ever last year on the strength of robust exports in semiconductors and automobiles, with its economy expanding 6.1 percent.

The central bank predicted the nation’s current account for February to remain in the black despite escalating prices of oil and raw materials.

The cost of the benchmark Dubai Crude Oil reached the $110 mark on Friday, while commodity prices caused Korea’s import prices to rice at the fastest pace in 23 months in January.

“Although rising raw material prices raised import bills, the current account is expected to remain in the black for February as exports are performing better than expected,” Lee Young-bog, head of the BOK’s balance of payments statistics team, said at a press conference.

The BOK forecasted in December that Korea’s current account surplus will reach $18 billion with an economic growth of 4.5 percent, as imports will likely pick up amid the economic rebound.

The second-largest ever import total in January sent the surplus of the balance of goods into a tailspin, as it fell to $1.63 billion, down from $3.68 billion the previous month. The trade balance is the biggest component of the current account.

Exports gained 34.4 percent year-on-year to $42.74 billion, the third-largest number ever, but they were offset by imports worth $41.11 billion, a 33.4 percent increase from a year ago.

The service account deficit widened to $1.64 billion in January, compared with a $1.15 billion deficit the previous month, due to larger spending by Koreans on overseas travels, with the travel account shortfall reaching $1.16 billion last month, the biggest deficit since $1.27 billion in August 2008.

The capital and financial account, covering cross-border investments, posted a net outflow of $1.65 billion in January, compared with a net outflow of $336.2 million in December.