Current account surplus hits 3-month high

By Kim Tong-hyung

Korea’s current account surplus hit a three-month high in March thanks to strong growth in exports, the Bank of Korea (BOK) said Thursday. It was the 13th consecutive month that the balance of payment remained in the black and it continues to add upward pressure on the value of the local currency.

Some observers expect the surplus to shrink in the coming months as imports rise due to an improving economy in addition to increasing fuel and raw material costs. The BOK recently lowered its projection for the country’s current-account surplus for the year to $11 billion from $18 billion citing higher crude oil costs.

The current account surplus of $1.43 billion for March represented an increase from a revised $1.13 billion in February and was the largest since $2.11 billion, registered in December last year.

Robust exports, which are withstanding a stronger Korean won that has risen about 3 percent in the past month to reach its highest level since 2008, were enough to offset increasing import costs and dividend payouts by local firms to foreign investors, the central bank said.

The goods account surplus rose to $2.86 billion won in March from $1.53 billion in February. Exports hit an all-time monthly high of $47.8 billion, representing more than a 24 percent annual increase, while imports also reset records by gaining more than 27 percent year-on-year at $45 billion, the BOK said.

The services deficit, which measures the flow of travel, transport and royalty costs, was $328 million in March, narrowing sharply from the revised $569 million in February.

“The current account surplus was a little smaller than we had been expecting. However, the surplus traditionally widens in the second-half of the year, so there is no reason yet to rethink our $11 billion projection for the year,” Kim Yeong-bae, director general of the BOK’s economic statistics division, said.

Kim downplayed concerns that the rising value of the Korean won will strain the competitiveness of Korean exporters.

“We believe that the value of the Korean won remains at a level that won’t hurt the international competitiveness of our firms, and barring dramatic changes in the future, we believe that our annual current account forecast is achievable,” he said.

“The value of the won rose 3.2 percent this month, but we don’t see it affecting exports yet. This could force the current account surplus for April to shrink, but we aren’t in danger of dipping into the red.”

The primary income account, which tracks wages for foreign workers and dividend payments overseas, logged a deficit of $858.4 million last month, a turnaround from a surplus of $542.6 million in February.

The capital and financial account, covering cross-border investments, posted a net inflow of $498.5 million in March, compared with a net outflow of $2 billion in February.

Overseas borrowing hit a four-year high of $8.62 billion in March, up sharply from $2.69 billion in February. Short-term borrowing came to $6.72 billion in March, the highest volume since the $6.81 billion recorded in August 2008.