Current account surplus hits 7-month low

By Lee Kyung-min

Korea's current account surplus hit a seven-month low of $5.06 billion (4.5 trillion won) in November due to a major setback in export growth, the Bank of Korea (BOK) said, Thursday.

The November figure was down from $7.43 billion a year earlier.

While it still marked the 81st consecutive month of surpluses since March 2012, the amount was the smallest since April 2018 when it posted $1.77 billion.

“An overseas sales slowdown in key sectors such as semiconductors and petrochemicals led the decline,” said Roh Chung-seak, a director of the BOK statistics division.

“The sluggish global trade stemming from the ongoing trade dispute between the U.S. and China also negatively affected the country's exports.”

Exports logged a surplus of $51.72 billion in November, up 0.5 percent from a year earlier, a major setback from the previous month's 28.8 percent expansion.

As a result, the goods account surplus dipped to $7.97 billion in November from $11.46 billion a year earlier.

Experts expressed concern that Korea is beginning to witness a long-unresolved problem taking a toll on the economy ― a heavy reliance on key export items.

“Korea's export-driven economy has relied mostly on semiconductor and petrochemical sales,” said Lee Chae-woong, emeritus professor of economics at Sungkyunkwan University.

“While the county earlier enjoyed brisk exports, the economy will surely become worse, with no clear solution to the shrinking global demand for the key export items. Many economists have called for portfolio diversification to explore new markets or produce new goods and services, but there is none as of now,” he said.

Samsung Electronics, the world's largest chipmaker, reported an “earnings shock.”

The world's largest chipmaker posted 10.8 trillion won in operating profit in the September-December period in 2018, a 28.7 percent drop from a year earlier.

The industry will no longer be able to avoid decreasing profit because a crude oil price drop and strong chip sales ― factors that had offset what could have been a poor performance ― will no longer be at play, he added.

“Signals are clear that the country entered the beginning of what is expected to be a protracted downturn,” he said.

The services account deficit dropped to $2.29 billion from a deficit of $3.27 billion a year earlier due to improvements in the transport and travel accounts.

Profits involving sales of chips, petrochemicals and refineries will markedly drop this year, said Yun Chang-hyun, a business professor at the University of Seoul.

“The operation of manufacturing peaked in 2011 and has since gone downhill. Labor productivity during the time had not improved either, resulting in an overall industry decline, Businesses dealing with cars, displays, cellphones and steel may even see their businesses go in the red,” he said.

Prospects bleaker

The data is largely in line with the dominant market view that Korea should brace for a further slowdown this year.

According to the 2019 industry assessment report released by Hana Institute of Finance, Korea will see its operating profit drop in manufacturing, a clear end to years of continued profits between 2015 and 2018.

The report clearly noted that manufacturing, one of Korea's major pillar industries, will face a downturn in 2019 due to a lack of competitive edge against Chinese products with quality fast matching Korea's level, further compounded by lingering global uncertainties.

The projection was made alongside other key sectors including petrochemicals, refineries, cars, displays, cellphones and steel, all of which account for 87.4 percent of the country's manufacturing output.

The institute said the operating profit in the country's 10 sectors will see a 2.7 percent drop in 2019 compared to a year earlier.

The export sales of the country's top nine manufacturing sectors will increase by only 3 percent, significantly lower than 5.7 percent increase in 2018.

Facility investments in the top 10 manufacturing sectors will also remain at 2.8 percent, much lower than the 6.4 percent of 2018, it added.