Travel Account Deficit Reduced
Korea's exports of semiconductors remained strong in July amid recovering global trade, boosting the nation's current account surplus to a 10-month high.
Korea’s travel account deficit slid from a year ago as the number of visitors to Korea from Japan and China swelled while the growth of outbound Korean travelers slowed down.
According to the Bank of Korea (BOK)'s provisional international balance of payments in July 2018 released on September 6, Korea’s July current account surplus arrived at US$8.76 billion. The figure was the highest since September of last year (US$ 12.29 billion).
Korea’s goods balance provisionally stood at US$11.43 billion. The surplus was the largest since November of last year (US$ 11.46 billion). Exports of goods totaled US$54.06 billion, up 14.8% from a year ago. A boom in semiconductor exports led to the highest exports of goods since September of last year
Korea’s imports amounted US$42.63 billion, up 16.8% from a year ago. Its service balance posted a deficit of US$3.12 billion. The deficit rose from the previous month (US$2.45 billion), but sank from July (US$3.29 billion).
When observing Korea’s service balance in detail, Korea chalked up US$1.48 billion in deficit in the travel balance. Travel income totaled US$1.25 billion, while travel payments hit US$2.73 billion which was more than the travel income. Korea’s travel account deficit also swelled from the previous month (US$1.2 billion) but fell from July of last year (US$1.79 billion).
"An increase in the number of outbound travelers slowed down and the number of Chinese and Japanese travelers to Korea increased significantly from a year ago," a BOK official said. "Chinese and Japanese travelers to South Korea increased thanks to a base effect from a drop in Chinese travelers to Korea due to China’s retaliatory actions against South Korea for the deployment of the THAAD System in South Korea and the easing of North Korean risk in South Korea. The number of outbound travelers increased 4.4%in July, but the number of inbound travelers ballooned 24.4 percent. In particular, the number of Chinese arrivals soared 45.9% and that of Japanese arrivals 35.1% from the previous year.
Korea’s primary income account was a surplus of US$1.22 billion while Korea’s transfer income account was a deficit of US$770 million. Net assets (assets minus liabilities) in Korea’s financial account which indicate a capital inflow increased by US$10.46 billion.
Korea’s foreign direct investment grew by US$2.67 billion while foreigners’ investment in Korea climbed by US$410 million. In securities investment, Koreans’ foreign stock investment rose by US$1.52 billion and foreigners’ investment in Korean stocks by US$4.72 billion.
Foreigners’ investment in Korean stocks continued to decline due to weakening investment sentiments stemming from the US-China trade dispute. But foreigners’ investment in Korean bonds was on the rise due to Korea’s higher national credit rating and ample foreign exchange reserves compared to other emerging economies. Derivative instruments increased by US$1.09 billion. In foreign exchange reserves, reserve assets excluding non-transaction factors such as the exchange rate jumped by US$1.49 billion.