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Current account ‘turned into surplus’ of $3.86 billion in May… Surplus shrinks sharply from previous year

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Exports boosted by brisk petrochemicals and semiconductors
It will satisfy the forecast of $21 billion in the first half of the year.

In May of this year, the current account again became a surplus. However, the surplus narrowed compared to last year due to higher import prices such as raw materials.

According to interim balance of payments statistics released by the Bank of Korea on the 7th, the current account surplus in May this year was $3.86 billion (about 5.4 trillion won).

The current account maintained a surplus for 23 consecutive months from May 2020 to March this year. Then in April it became unprofitable due to rising earnings and the overlap of foreign dividends, but in May, a month later, it managed to go negative again. However, the surplus fell by $6.55 billion from $10.41 billion in the same month last year.

monthly checking account.

monthly checking account.

In terms of items, the positive balance of the commodity account amounted to $2.74 billion. This is $3.91 billion less than a year ago. This is due to the fact that imports have increased more than exports. Exports amounted to 61.7 billion dollars. It was up 20.5% year-over-year on strong sales of petroleum products, chemicals and semiconductors. Imports grew by 32.4% to $58.96 billion.

In addition, imports of raw materials rose by 52.9% compared with the same month last year, according to May customs data. Among raw materials, imports of coal, gas, crude oil and oil products increased by 231.4%, 73.9%, 65.0% and 31.9%, respectively. Imports of capital goods such as semiconductors and transportation equipment also increased by 14.1%.

Kim Yong-hwan, head of financial statistics at the Bank of Korea, explained, “The merchandise balance has decreased compared to the same month of the previous year due to a significant increase in imports due to rising energy prices.” “A current account surplus in June is very likely and the current account outlook for the first half of the study country is expected to be in line with the $21 billion current account forecast,” he explained.

The service account has a $20 million deficit. After hitting -$490 million in January of this year, it was back in the red four months later. The deficit was $720 million less than a year ago.

From the balance of services, the transport surplus in particular increased by $410 million from $1.06 billion to $1.47 billion in one year. This is due to the fact that export freight rates remained at a high level, and the sea container freight rate index (CCFI) rose by 43.0% compared to last year in May.

The travel report recorded a $640 million deficit, down slightly from the $700 million deficit last May.

The primary income balance was $1.45 billion in surplus. However, the dividend income balance plummeted from $4.22 billion to $520 million for the year. In response, the BOK clarified that this was the “underlying effect” of the one-time large-scale dividend income in May last year.

Net assets in financial accounts, excluding liabilities, increased by $3.03 billion in May. In terms of direct investment, foreign investment of Koreans increased by $5.47 billion and foreign investment in domestic investment increased by $1.37 billion. In terms of investment in securities, foreign investment of Koreans increased by $7.13 billion, and foreign investment in domestic securities also increased by $2.46 billion.

Kim Yun-ju, staff correspondent joos2@edaily.co.kr

Source: Economist

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