A Hike in Outbound Travelers Fuels Deficit
South Korea’s service account deficit hit a record high last year.
According to a Bank of Korea report on the nation's international balance of payments for 2017, which was released on June 21, South Korea’s total service account deficit nearly doubled to US$34.47 billion (38.35 trillion won) from US$17.74 billion (19.73 trillion won) in 2016.
The nation’s service account deficit with the US stood at US$15.38 billion (17.1 trillion won), reaching the highest figure ever. The deficit increases to US$15.63 billion (17.39 trillion won) when last year's closing won-dollar exchange rate of 1,130.48 won is applied.
South Korea’s goods account surplus with the US stood at US$39.99 billion (44.49 trillion won) in 2017, the smallest amount after US$25.61 billion (28.49 trillion won) recorded in 2012.
Experts attriburted the sharp decline in the nation’s goods and service account surplus with the US to trade pressures from Washington. Last year, the South Korean government announced plans to cut its trade surplus with the US to avoid the possibility of Korea being designated by the US as a currency manipulator. In fact, South Korea increased imports of raw materials, such as shale gas and crude oil, last year. An official from the BOK said, “It is true that imports of gas and shale gas increased but a drop in exports of vehicles and auto parts to the US led the sharp decline in goods trade surplus.”
A sudden rise in the number of outbound South Korean travelers also boosted the nation’s service account deficit. Its deficit with Japan and the EU rose to US$3.88 billion (4.32 trillion won) and US$12.28 billion (13.66 trillion won), respectively, recording the highest figures ever.
South Korea posted US$290 million (322.63 billion won) in service account deficit with China, the first deficit in six years. The Chinese government imposed a ban on group travel to Korea in March last year in retaliation for Seoul’s deployment of a U.S.-led missile defense system. The nation’s service surplus turned into losses as it continued to decrease from the record high of US$7.87 billion (8.76 trillion won) in 2014.