April Current Account Deficit of $3.12 Billion... Largest Since January 2011 (Comprehensive)

April 2020 Balance of Payments (Preliminary) Announcement

Expansion of Domestic Investors' Overseas Stock Investment and Foreign Investors' Domestic Bond Investment
US Fed, KRW Withdrawal Amount from Korea-US Currency Swap Approximately 17.5 Billion USD

[Image source=Yonhap News]

[Asia Economy Reporter Kim Eun-byeol] In April, when the novel coronavirus infection (COVID-19) spread and the world entered lockdown measures, South Korea recorded its largest current account deficit in 111 months.

According to the "April 2020 Balance of Payments (Provisional)" released by the Bank of Korea on the 4th, the current account deficit for April was $3.12 billion. This marked another deficit after one year since April last year, and the deficit size was the largest in 111 months since January 2011 ($3.16 billion).

The cause was a sharp decline in export volumes to the US and Europe, along with a drop in export unit prices for semiconductors and chemical products, which significantly reduced the surplus in the goods balance.

Exports in April were $36.39 billion, decreasing for two consecutive months compared to the same month last year. The export volume was the smallest in 122 months since February 2010. Imports also decreased for two consecutive months compared to the same month last year, amounting to $35.57 billion. The sharp drop in oil prices led to a notable decrease in raw material imports, centered on crude oil.

However, the goods balance maintained a surplus of $820 million. According to customs clearance standards by the Korea Customs Service, the trade balance in April was negative for the first time in 99 months, but it turned positive due to additional factors such as overseas production and ships.

The services balance recorded a deficit of $1.42 billion, with the deficit widening by $150 million compared to the same month last year. The deficit was also larger than the previous month of March's services balance deficit (-$1.39 billion). Although the services balance had recently shown improvement as domestic travelers decreased due to COVID-19, in April, the deficit in intellectual property rights usage fees worsened due to a decrease in trademark and patent royalty receipts from major IT companies, negatively impacting the balance.

Dividend income payments in April were $4.52 billion. This increased significantly as dividend payments from year-end settlement corporations were concentrated in April. However, due to the deterioration in profitability of major domestic companies last year, the payment amount was lower than the same month last year ($6.7 billion). The primary income balance, which includes dividend income, recorded a deficit of $2.29 billion, reducing the deficit by $1.9 billion compared to the same month last year.

As the financial market situation recently stabilized, domestic investors' overseas securities investment increased by $7.18 billion. Overseas stock investment increased by $5.43 billion, and overseas bond investment increased by $1.75 billion. Foreigners' domestic stock investment decreased by $3.14 billion, marking a decline for three consecutive months, but foreigners' domestic bond investment increased by $6.21 billion, marking an increase for four consecutive months.

Meanwhile, in April's financial account, cash and deposits increased by $17.45 billion as central bank won deposits increased due to the Korea-US currency swap. The won withdrawn through the Korea-US currency swap by the US Federal Reserve (Fed) is deposited in the Fed account within the Bank of Korea, and the amount converted into dollars is similar to this amount.

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