Sundae Foreign Financial Assets Reach $565.4 Billion 'Record High'... "Mainly Due to Significant Debt Reduction"

Foreign Financial Liabilities at $1.1073 Trillion... Decrease of $91.5 Billion

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] In March, South Korea's net external financial assets reached a record high of $565.4 billion. This means that the country's financial reserves to respond to economic crises have grown substantially.

According to the "International Investment Position (Preliminary) as of March 2020" released by the Bank of Korea on the 21st, South Korea's net external financial assets stood at $565.4 billion at the end of March, an increase of $64.5 billion from the previous quarter. Net external financial assets are calculated by subtracting the balance of foreign investment in the domestic market (external financial liabilities) from the overseas investments made by domestic residents (external financial assets).

The record high in net external financial assets in March was due to the decrease in external financial liabilities being larger than the decrease in external financial assets.

A Bank of Korea official explained, "The decline in stock prices reduced the valuation of liabilities, which led to a decrease in the size of liabilities. Since liabilities decreased more than assets, net external financial assets reached an all-time high."

External financial assets amounted to $1.6727 trillion, down $41.5 billion from the previous quarter. External financial liabilities were $1.1073 trillion, a decrease of $91.5 billion. While transactional factors increased by $16.3 billion, non-transactional factors such as the depreciation of the Korean won against the US dollar and stock price declines caused a reduction of $107.8 billion.

South Korea's net external claims decreased by $16.4 billion to $464.2 billion. Net external claims represent the amount South Korea is owed overseas (external claims) minus the amount it owes abroad (external liabilities). External liabilities increased by $18.8 billion to $485.8 billion, while external claims rose by $2.5 billion to $950 billion.

Short-term and long-term external debts increased by $14 billion and $4.8 billion respectively compared to the previous quarter. Short-term external debt is capital that is at high risk of rapid outflow during periods of high volatility in international financial markets.

Due to the decrease in short-term external debt, the ratio of short-term external debt to reserve assets (foreign exchange reserves) rose by 4.2 percentage points from the previous quarter to 37.1%. The short-term external debt ratio is used as an indicator of external payment capacity. The proportion of short-term external debt to total external debt, which indicates the soundness of external debt, also increased by 1.8 percentage points to 30.6%.

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