January Current Account Surplus Hits Lowest in 9 Months... One-Third of Previous Year (Comprehensive)

Impact of Worsening Trade Balance... Exports Decline for 14 Consecutive Months
BOK "Difficult to Predict COVID-19 Impact"

[Asia Economy reporters Eunbyeol Kim and Sehee Jang] South Korea's current account surplus in January recorded its lowest level in nine months. Compared to January last year, the surplus shrank to about one-third. The decline was largely due to a drop in prices of major export items such as semiconductors and a reduction in working days caused by the Lunar New Year holiday, which worsened the goods balance. The impact of the novel coronavirus disease (COVID-19) is not expected to be significant, as imports decreased alongside exports.

According to the 'January 2020 Balance of Payments (Provisional)' released by the Bank of Korea on the 5th, the current account surplus in January this year was $1.01 billion. This was the smallest surplus since a deficit of -$390 million was recorded in April last year. Compared to January last year (+$3.3 billion), the surplus shrank by $2.29 billion.

The deterioration in the goods balance, which accounts for more than 70% of the current account, had a significant impact. The goods balance surplus was $1.93 billion, down $3.82 billion from January last year ($5.75 billion).

Exports ($43.44 billion) decreased by 12.3% year-on-year, and imports ($41.52 billion) decreased by 5.2%. The decline in exports continued for the 14th consecutive month. Park Dong-jun, head of the Bank of Korea's international balance of payments team, explained, "January this year was worse than January last year, when the semiconductor price slump became visible," adding, "the Lunar New Year holiday fell in January, reducing working days by 2.5 days, and the prices of export items such as semiconductors, steel, and chemical products also declined." Semiconductor export prices in January fell 24.9% year-on-year, and steel products fell 14.6%.

Park said, "To remove the effect of the Lunar New Year holiday, we need to look at January and February together. After reviewing customs clearance data for February, the figures improved compared to last year," adding, "Even when combined, the balance is positive." Although exports decreased, imports also declined, so the impact of COVID-19 on the goods balance was not evident. The customs trade balance surplus in January decreased from $1.02 billion last year to $540 million, while the February customs trade balance surplus increased from $2.83 billion last year to $4.12 billion. Park explained, "The cumulative customs trade balance surplus for January and February increased from $3.85 billion last year to $4.65 billion this year, indicating that the impact of COVID-19 has been minimal so far."

The services balance deficit was $2.48 billion, a reduction of $1.05 billion compared to the same month last year (a deficit of $3.53 billion). This was due to a 15.2% increase in foreign arrivals, mainly Chinese visitors, while domestic departures decreased by 13.7%. In particular, the number of Chinese arrivals in January increased by 22.6% year-on-year. It is reported that arrivals and departures both sharply declined in February.

During previous outbreaks such as Severe Acute Respiratory Syndrome (SARS) and Middle East Respiratory Syndrome (MERS), the impact on the goods and services balances was limited. Especially in the travel balance, a significant decrease in outbound travelers from Korea could even lead to improvement.

The primary income balance, which includes wages, dividends, and interest, recorded a surplus of $1.69 billion, slightly increasing compared to a year ago.

In direct investment, domestic investors' overseas investment increased by $2.49 billion, and foreign investors' domestic investment increased by $550 million. In securities investment, domestic investors' overseas securities investment expanded by $6.34 billion amid a strong U.S. stock market. Foreign investors' domestic investment also turned to an increasing trend after three months.

Park said, "Although there was a slight withdrawal at the end of January, foreign investment in stocks and bonds came in without problems despite the spread of COVID-19 until January."

This content was produced with the assistance of AI translation services.