Recessionary Surplus
Korea’s current account posted a surplus for the third consecutive month in July, but it was a recessionary surplus as imports fell more than exports. In particular, a surge in overseas travel led to a larger deficit in the travel account, making the size of the service account deficit 36 times larger than a year ago.
The nation’s cumulative current account surplus in the first seven months of this year also shrank by a quarter compared to the same period last year, showing an unstable trend. According to provisional balance of payments statistics released by the Bank of Korea on Sept. 8, Korea posted a surplus of US$3.58 billion in the current account in July.
After a deficit of US$790 million in April, the current account remained in surplus for the third consecutive month with US$1.93 billion in surplus in May and US$5.87 billion in June. However, the cumulative January-July current account surplus of US$6.01 billion plunged by nearly 77 percent to 23 percent of the US$26.57 billion in the same period of last year.
Within the current account, the merchandise balance (US$4.28 billion) was positive for the fourth consecutive month since April, but it was a recessionary one with imports falling more than exports.
Korea’s exports (US$50.43 billion) were 14.8 percent (US$8.79 billion) lower than the same month of last year and negative for the 11th consecutive month, especially for petrochemical products (-41.8 percent), semiconductors (-33.8 percent), chemical industry products (-16.4 percent), and iron and steel products (-12.6 percent). Exports to China (-25.1 percent), Southeast Asia (-20.9 percent), the EU (-8.4 percent), the U.S. (-8.1 percent), and Japan (-6.0 percent) contracted.
Korea’s imports stood at US$46.15 billion, down by 22.7 percent (US$13.59 billion), with both the amount and rate of decline far outpacing those of exports, with commodity imports plunging 35.7 percent in the same month last year due to a drop in energy import prices.
Imports of capital goods such as semiconductors (-22.6 percent), semiconductor manufacturing equipment (-13.7 percent), and transportation equipment (-13.3 percent) ascended by 12.5 percent, while imports of consumer goods such as grains (-20.3 percent) and passenger vehicles (-19.2 percent) sank by 12.1 percent.
The services balance also showed a deficit of US$2.53 billion in July. While the deficit was slightly smaller than in June (-US$2.61 billion), it was nearly 36 times larger than in the same month last year (-US$70 million).
Korea’s deficit in the travel balance hit US$1.43 billion) which was nearly double US$840 million of a year ago, as Koreans’ international travel surged in earnest as COVID-19 restrictions eased. The transportation surplus (US$90 million) also plunged more than US$1.3 billion from US$1.47 billion in the same month of 2022.
The primary income balance which reflects wages, dividends, and interest flows posted a US$2.92 billion surplus. Compared to US$4.85 billion in June, it declined by US$1.93 billion.
The net assets of the financial account grew by US$3.72 billion in July. The net assets show capital inflows and outflows. In direct investment, Koreans’ direct outward investment inflated by US$2.42 billion, while inward direct investment by foreigners swelled by US$1.65 billion.
Stock investment increased by US$6.9 billion in Koreans’ overseas stock investments and by US$2.6 billion in foreigners’ investment in Korean stocks. The increase in overseas stock investment by Koreans was the largest amount in 14 months since May last year.