Value context and insight. lkm@koreatimes.co.kr
Current account surplus hits 7-year low in 1st half
By Lee Kyung-min
By Lee Kyung-min
Korea's current account surplus in the first six months of 2019 hit a seven-year low due to weak exports amid prolonged U.S.-China trade dispute, central bank data showed Tuesday.
According to Bank of Korea (BOK), current account surplus recorded $21.7 billion won (26 trillion won) in the January-June period in 2019, down $7.1 billion, or 24.7 percent from a year earlier.
It was the smallest since the first half of 2012 when the figure was $9.6 billion amid the Eurozone crisis.
“The narrowed surplus resulted from the trade dispute and falling Korean export volume to China as well as a drop in the price of semiconductors,” a BOK official said at a press briefing.
“The surplus has narrowed, but the account has remained in the black throughout the first half of the year except for April, when large dividends were paid out, what we consider a seasonal factor. The figure is above our estimate of $21.5 billion.”
The current account surplus was $6.38 billion in June alone, a 14.5 percent drop from a year earlier.
The drop was due to a fall in the goods account surplus, which dropped to $6.27 billion from $9.54 billion the year before.
Both exports and imports declined, but the former decreased faster, leading to a smaller surplus, the BOK said.
Exports decreased to $43.9 billion in June, a 15.9 percent drop from a year earlier, while imports shrank to $37.7 billion, an 11.8 percent drop from $42.7 billion a year earlier.
The services account deficit narrowed to $2.09 billion, down from $2.42 billion the year before, thanks to improvements in the transport and travel accounts.
By a six-month measure, the service account deficit recorded $12.3 billion in the January-June period, the smallest since the latter half or 2016.
The improvement in the service account was due to a steady increase in the number of inbound tourists from Japan and China as well as fewer outbound Korean tourists who reduced their overall spending overseas.
“While the current account surplus has become smaller due to the prolonged U.S.-China trade war, we have seen major improvements in the service account, a highly positive sign,” the official said.
However, the Korean economy will not see any positive signs as the escalating Korea-Japan trade dispute is highly likely to become a fully-fledged war that will deal a major blow to the semiconductor industry, according to Yun Chang-hyun, an economist at the University of Seoul.
“The prospect is bleak given exports have been on a steady decline over the past few months, meaning the country will have to brace for a scenario far worse than the status quo,” he said.