Korea has posted a current account surplus for the fifth consecutive month. The Bank of Korea (BOK) forecast that Korea will be able to reach an annual current account surplus of US$27 billion by steadily enjoying current account surpluses.
The BOK said on Nov. 8 that the current account posted a surplus of US$5.42 billion in September. It was the first time in 14 months since the five months from March to July 2022 that Korea posted a current account surplus for five consecutive months.
Korea’s goods balance posted the largest surplus (of US$7.42 billion) in two years since September 2021. Passenger car exports continued to be strong, led by those to the United States and the European Union, while semiconductor exports showed a year-over-year decline. A larger year-on-year decline in imports than in exports also contributed to an increase in Korea’s trade surplus as energy prices remained lower than 2022.
The nation’s services account deficit climbed to US$3.19 billion. The services balance in intellectual property royalties turned into a deficit as Korean companies received less patent royalties from overseas subsidiaries, while a deficit in other business services (research and development, etc.) soared due to lower business revenues. The deficit in the tourism account shrank as the number of foreign arrivals in Korea inched up and the number of Koreans’ departures dwindled. The primary income balance showed a surplus of US$1.57 billion similar to the previous month’s.
Korea’s cumulative current account balance through September 2023 stood at US$16.58 billion. Arithmetically, an average surplus of US$3.5 billion in each of October, November, and December is needed to reach the forecast. This explains why the BOK thinks that the yearly forecast is achievable. For now, the BOK expects October’s current account balance to be similar to September’s. While the goods balance may shrink due to a smaller surplus in the customs trade balance in October, the tourism account deficit is expected to drop enough to offset this, the BOK forecasts.
However, the BOK qualified the forecast. It said that the overall current account deficit in the fourth quarter may contract beginning from the third quarter. First of all, imports may inflate due to volatile oil prices and demand for oil for winter heating. Semiconductors also entered a recovery phase, but there is a lot of uncertainty about how fast the recovery will be. In addition, Chinese group tourism resumed in August, but the number of Chinese tourist arrivals has not increased explosively, which is another concern for Corporate Korea.