Surplus Streak Extended to 79 Months
South Korea's current account surplus in September topped US$10 billion (11.25 trillion won) on the back of brisk exports amid an expansion in the global trade volume.
The transport account balance, which fell with the slowdown in the global shipping industry, turned into a surplus for the first time in 25 months. However, foreign investment in local stocks and bonds turned into an outflow for the first time in seven months due to the maturing of a large amount of bonds.
According to preliminary data released by the Bank of Korea (BOK) on Nov. 6, the nation’s current account surplus reached US$10.83 billion (12.16 trillion won) in September, the highest since September last year when it marked US$12.29 billion (13.78 trillion won). Korea’s surplus streak has been extended to 79 months, renewing the record. Current account surplus surpassed the US$10 billion (11.22 trillion won) mark in 12 months.
The gain in the current account balance was largely driven by the goods account, which generated a surplus of US$13.24 billion (14.85 trillion won) in September. It was also the largest since the previous record of US$14.98 billion (16.8 trillion won) a year ago. Shipments of goods dipped 5.5 percent from a year earlier to US$51.08 billion (57.29 trillion won) in September, while imports dropped 3.2 percent over the year to US$37.83 billion (42.43 trillion won).
The service account logged a deficit of US$2.52 billion (2.83 trillion won) in the month, narrowing slightly from US$2.88 billion (3.23 trillion won) a year earlier. The travel account deficit took up about half of the total service account deficit at US$1.13 billion (1.27 trillion won). However, the deficit in the travel account narrowed from a year ago on the back of an increasing number of Japanese and Chinese visitors to South Korea. The number of outbound tourists slipped 0.5 percent in September, showing a decrease for the first time in 80 months after January 2012.
The transport account balance turned into a surplus of US$30 million (33.65 billion won), the first turnaround in 25 months after US$20 million (22.43 billion won) in August 2016. It was largely due to the US$130 million (145.8 billion) surplus in the air transport account, which was the result of an increase in the number of tourist arrivals.
The cumulative current account surplus from January to September this year stood at US$57.68 billion (64.69 trillion won). The goods account balance posted a surplus of US$91.6 billion (102.73 trillion won), while the service account marked a deficit of US$23.68 billion (26.56 trillion won).
Park Yang-su, director of the BOK, said, “The annual current account surplus of US$70 billion (78.51 trillion won) will be achieved with ease as the BOK has expected.”
The financial account, which measures cross-border capital flow without transactions in goods and services, recorded a net inflow of US$9.73 billion (10.92 trillion won) in September. The overseas direct investment by local residents grew US$2.47 billion (2.77 trillion won) in the month, while foreign direct investment in South Korea rose US$300 million (336.67 million won).
In particular, the cumulative overseas investment by local residents from January to September this year amounted to US$28.1 billion (31.54 trillion won), reaching a record high. This was because South Korean companies made large-scale equity investments in foreign companies this year, including SK Hynix’s acquisition of Toshiba’s memory semiconductor business division in Japan.
The cumulative foreign investment in South Korea from January to September also recorded the fifth highest figure ever at US$9.16 billion (10.28 trillion won). The portfolio investment by local residents into foreign securities gained US$7.72 billion (8.66 trillion won), but foreign investment into local stocks and bonds reduced US$1.4 billion (1.57 trillion won). With the weak investor sentiment stemmed from the global trade dispute and the large-scale redemption at maturity in foreign bond investment, the foreign investment in South Korea decreased for the first time after February this year.