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Current-account surplus

S. Korea’s current account surplus at 2-yr high; full-year surplus to top BOK forecast

By Nov 05, 2020 (Gmt+09:00)

South Korea’s current account surplus rose in September to its highest level in two years on the back of rebounding exports of chips and automobiles, lending further support to the strengthening local currency.

Following the buoyant data, a senior Bank of Korea official said on Nov. 5 that the central bank expects this year's full-year surplus to top its $54 billion forecast, to rise closer to last year's surplus of $60 billion.

The current account surplus, the broadest measure of Korea’s trade with the rest of the world, totaled $10.21 billion in September, up from $6.57 billion in August, according to Bank of Korea data. That compared with a surplus of $7.76 billion a year earlier.

The latest surplus topped the $10 billion mark for the first time in two years and was the largest since September 2018, when the surplus reached $11.24 billion.

Korea's current account surplus rises to a two-year high, lending support to the won.
Korea's current account surplus rises to a two-year high, lending support to the won.

The current account balance has been in the black for the five straight months since the country logged a deficit of $3.3 billion in April, the largest shortfall in almost a decade, on faltering exports amid the COVID-19 pandemic.

In the first nine months of the year, the country ran a surplus of $43.4 billion, surpassing the $41.8 billion surplus posted in the same period of last year.

FULL-YEAR FIGURE TO TOP BOK FORECAST

"Given the improving export trend, the full-year surplus will likely surpass the BOK's forecast and may reach closer to last year's figures," Park Yang-su, head of the central bank's economic statistics department, said at a media briefing.

He added that a resurgence of the pandemic in the US and Europe and uncertainty surrounding the outcome of the US presidential election serve as downside risks.

Thursday’s data showed the country’s goods account balance posted a surplus of $12.02 billion in September, up from $7.01 billion in August. The reading also marks the largest in two years, boosted by a rebound in exports.

Korea’s exports, which account for half the national economy, rose 8% on the year to $49.85 billion in September.

The services account, which includes outlays by South Koreans on overseas trips, posted a deficit of $2.04 billion, compared to a shortfall of $800 million in August.

The primary income account, which tracks wages for foreign workers and dividend payments overseas, logged a surplus of $610 million in September, down slightly from a surplus of $630 million the previous month.

The capital and financial account, covering cross-border investments, posted a net inflow of $8.91 billion, up from a net inflow of $4.84 billion in August.

Economists expect the underlying trend of current account surpluses to continue this year, lending further support to the South Korean won, one of Asia’s best performers.

In August, the BOK lowered its 2020 outlook for the country's current account surplus to $54 billion from its previous estimate of $57 billion, citing sluggish global trade amid the pandemic.

Write to Ik-Hwan Kim at lovepen@hankyung.com

In-Soo Nam edited this article.

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