Current Account Swings to Surplus
By Na Jeong-ju
Staff Reporter
The current account swung back to a surplus in May on strong exports, but the rapid rise in banks' short-term overseas borrowing and widening service account deficit could harm the country's growth potential, the Bank of Korea (BOK) said Friday.
The current account recorded a surplus of $924 million in May, the first surplus in three months and a turnaround from a revised shortfall of $2.08 billion in April. The April figure was the largest monthly deficit since the $2.44 billion shortfall in Feb. 1997.
``The turnaround reflects brisk exports of ships, cars and steel and a decrease in dividend payments to foreign investors,'' said Jeong Sam-yong, an official of the BOK's Balance of Payments Statistics Team.
The bank forecast the current account, the broadest measure of trade, service and investment flows, will remain in surplus in June. However, in July and August, when the trade surplus narrows and service deficit surges due to summer holidays, the nation will likely log current account shortfalls, he said.
The cumulative current account balance amounted to a $2.8 billion deficit as of the end of May, compared with a $1.4 billion shortfall a year earlier, the bank said.
The central bank remained positive about the annual current account surplus, saying the country is expected to post a current account surplus of $2 billion for the full year.
The seasonally adjusted current account surplus reached $146.5 million last month, compared with a shortfall of $382.5 million in April.
The country's net borrowing in May amounted to a record monthly high of $3.7 billion, up from $2.2 billion in April. Short-term overseas borrowing by lenders also jumped to a new high of $2.9 billion from a revised $1.3 billion a month earlier, the bank said. Financial regulators have issued repeated warnings on soaring overseas borrowing, saying excessive liquidity will increase inflationary pressure.
The trade surplus grew to $2.3 billion last month, up from a revised surplus of $1.5 billion in April. Customs-cleared exports soared 11.4 percent year-on-year to $31.1 billion, while imports surged 13.4 percent to $29.7 billion.
The service account deficit widened to $1.5 billion from a revised $1.4 billion as the number of South Koreans going abroad and overseas patent payments increased, the bank said.