Service Account Deficit
South Korea’s current account surplus showed a sign of slowing down in January with its current account surplus continuing longest. Its monthly service account deficit reached a record high. This is because Korea’s travel account deficits snowballed as the number of outbound travelers hit a record high due to winter vacations and holidays. Deficits caused by the payment of intellectual property loyalties also contributed to the increase in the service account deficits.
South Korea’s current account surplus, including goods and services, stood at US$5.28 billion, according to international balance and payments released by the Bank of Korea (BOK) on March. 3. As a result, the current account surplus chalked up the longest surplus for 59 consecutive months since March 2012.
The surplus in January sank by US$2.6 billion from US$7.78 billion last December, the smallest in five months since US$5.08 billion in August 2016.
The service account deficit totaled US$3.36 billion. The figure more than quadrupled from US$790 million in December of 2016. The travel account deficit, which accounted for the lion’s share, grew from US$1.02 billion last December to US$1.22 billion last January. As the number of outbound travelers increased thanks to winter vacations, the deficit expanded.
It is said that the deployment of the US military's THAAD (high-altitude area defense) System on South Korean soil has not yet had a negative impact on the influx of Chinese travelers. "In January, the number of Chinese arrivals rose," said Park Jong-yeol, the head of the Financial Statistics Department of the Economic Statistics Bureau at the Bank of Korea. “Per capita consumption of foreign tourists in South Korea decreased from US$1,207 in January of 2016 to US$990.7 in January of 2017. About 570,000 travellers (46%) of 1.22 million inbound tourists in January were Chinese."
The payment of intellectual property loyalties by some large corporations drove Korea’s deficit in intellectual property loyalties to jump up to US$510 million, aggravating the service account balance. The deficit is the largest in 11 months after February last year (US$580 million). The deficit in the transportation account balance was US$230 million, up from US$160 million in December last year on account of the demise of Hanjin Shipping.
Net assets (assets minus liabilities) of the financial account, which represent capital inflow and outflow in January, rose to US$4.35 billion. Foreign direct investment jumped by US$3.85 billion and foreign investment in Korea by US$580 million. In the case of securities investment, Koreans’ overseas investment swelled by US$6.05 billion during the same period, while foreign investment in Korea by US$1.28 billion.
In the meantime, Korea’s commodity exports rose 18.1 percent to US$44.1 billion, while its imports rose 24.5 percent to US$36.29 billion year on year in January. Both exports and imports have spiked for three consecutive months since November last year, and the year-on-year growth also climbed. The trade surplus also dropped most slightly to US$7.8 billion in five months since August last year.