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“Korea’s Current Account Surplus Is Not Based on Exchange Rate”
Central Bank Governor’s Refutation
“Korea’s Current Account Surplus Is Not Based on Exchange Rate”
  • By matthew
  • November 15, 2013, 10:26
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Bank of Korea governor Kim Choong-soo at an event in 2012.
Bank of Korea governor Kim Choong-soo at an event in 2012.


Bank of Korea governor Kim Choong-soo said on November 14, 2013 that Korea’s large-scale current account surplus as of late is derived from emerging economies rather than advanced countries, and thus it is stretch to say that the surplus is based on the depreciation of the won. He added that Korea is showing at least some deficits when considering its trade relations with the United States, Japan, and Europe. 

The remarks are regarded as a roundabout refutation against the US’s recent complaints about the value of the Korean currency. “If the surplus is because of the currency exchange rate, it would be shown across all industries, but it is not,” he explained, continuing, “The surplus is shown in certain sectors like semiconductors and mobile phones, which means it is based on non-price competitiveness.” He also mentioned, “As far as I see, the current exchange rate level shows no difference from market figures.”

Still, he said that he is not sure about whether or not the Korean economy has entered a stage where the surplus is sustainable and structural. “The current surplus might be temporary and not be continuing for long,” he commented. 

Korea has posted current account surpluses for 20 consecutive months until September this year, and the amount has already exceeded US$48.79 billion this year alone. The central bank is estimating the yearly total at US$63 billion, which is a record high. 

Earlier on October 30 (local time), the US Department of Treasury submitted a report to Congress to point out that the Korean currency is undervalued by 2% to 8% compared to the economic fundamentals, lodging a complaint regarding the sizes of Korea’s foreign exchange reserves and current trade surplus. 

In the meantime, the governor said that Korea’s GDP gap, which is below zero now, is expected to disappear in or around the latter half of next year. “It seems that the tapering of quantitative easing will not have a significant impact in the short term,” he added. “We will mull over various measures to absorb the impact and deal properly with the household debt problem.