Korea’s current account returns to black in May

[Photo by Yonhap]

South Korea’s current account for May turned positive after a month on the back of a goods account surplus and increased dividend payments from overseas, central bank data showed Friday.

The country‘s current account surplus reached $1.93 billion in May, swinging from a deficit of $790 million a month earlier, according to the preliminary data from the Bank of Korea (BOK).

However, the cumulative current account balance from January to May this year still remained in deficit at $3.44 billion. This represents a decrease of $22.25 billion compared to the same period last year when it was $18.81 billion.

The country posted a goods account surplus of $1.82 billion in May following a surplus of $580 million in April, the data showed.

Exports shrank 14.7 percent, or $ 9.06 billion, on-year to $52.75 billion. It is the ninth consecutive month of retreat after exports fell for the first time in 23 months in September last year. On a customs clearance basis, outbound shipments of semiconductors, petroleum products, chemical products, and steel products plunged 35.6 percent, 33.0 percent, 20.8 percent, and 8.3 percent, respectively, due to the global economic slowdown.

By region, exports to Southeast Asia, China, Japan, and the European Union dropped 26.9 percent, 21.1 percent, 8.4 percent, and 3 percent, respectively, over the same period. However, exports of passenger vehicles surged 52.9 percent from a year earlier.

Imports also declined 13.5 percent, or $7.93 billion to $50.93 billion from a year ago. In particular, imports of raw materials fell by as much as 20.3 percent from the same month last year. Among the raw materials, imports of coal, petroleum products, gas, and crude oil shrank 35.2 percent, 25.5 percent, 20.3 percent, and 16.2 percent, respectively.

Imports of capital goods also fell 5.7 percent, with decreases of 14.6 percent and 7.0 percent in semiconductors and semiconductor manufacturing equipment, respectively. Imports of consumer goods fell 7.8 percent, including a decrease of 17.4 percent in home appliances.

The balance of services also marked a shortfall of $910 million, widening by $760 million from a $150 million deficit in May last year. However, the deficit slightly narrowed from $1.21 billion in April.

Specifically, travel balance logged a deficit of $820 million as overseas travel increased with eased Covid-19 restrictions, while the transportation balance posted a $350 million deficit, swinging from a surplus of $30 million in April.

The primary income account, which tracks wages of foreign workers and dividend payments overseas, turned to a surplus of $1.42 billion in May from a deficit of $90 million in April, largely driven by a surge in the dividend income balance, which jumped from a $550 million deficit to a $900 million surplus over the month.

The financial account net worth, calculated by subtracting all liabilities from assets, widened by $2.65 billion in May. For direct investment, overseas investment by Koreans increased by $3.17 billion and foreign investment in Korea increased by $1.07 billion. For securities investment, overseas investment by Koreans and domestic investment by foreigners increased by $1.54 billion and $13.5 billion, respectively.

The increase of $13.5 billion in foreign investment in domestic securities was the largest since relevant data started to be compiled in January 1980.

The BOK attributed the surge to the simultaneous increase in demand and supply for domestic bonds, including arbitrage trading and increased issuance of government bonds, which led to a sharp increase in foreign investment in domestic bonds.