First Half Current Account Surplus of 19.17 Billion USD... Lowest in 8 Years (Update)

Bank of Korea June 2020 Balance of Payments (Preliminary)

[Asia Economy Reporter Kim Eunbyeol] The current account surplus in the first half of this year recorded the smallest surplus in eight years on a half-year basis.

According to the Bank of Korea's announcement on the 6th, the current account surplus in the first half of this year was $19.17 billion, down about $3.46 billion from $22.63 billion in the first half of last year. This is the smallest surplus in eight years since the first half of 2012, when it recorded $9.65 billion on a half-year basis.

The significant decrease in the current account surplus is largely due to the impact of the global trade slump caused by the novel coronavirus disease (COVID-19), which hit exports. Exports in the first half amounted to $241.93 billion, down 13.1% compared to the same period last year. Exports showed weakness mainly in petroleum products, passenger cars, and automobile parts.

Due to the impact of COVID-19 and the decline in oil prices, imports in the first half also decreased by 9.8% year-on-year to $217.94 billion. The price of crude oil imports in the first half of this year was $48.0 per barrel, down 27.7% from $66.5 per barrel in the first half of last year. Amid the simultaneous slump in exports and imports, the surplus in the goods balance in the first half was limited to $240 million.

On the other hand, the service account deficit in the first half was $8.41 billion, marking the smallest deficit since the first half of 2016 ($7.79 billion deficit). This was the result of a significant reduction in international travel due to the impact of COVID-19. The travel balance in the first half recorded a deficit of $3.1 billion, the smallest deficit since the second half of 2014 ($2.2 billion deficit). The transportation balance showed a deficit of $230 million, narrowing the deficit by $670 million compared to the same period last year. Although global trade volume was sluggish, the increase in air freight charges led to higher air cargo transportation income. Transportation income in the first half was $11.38 billion, with a limited decrease compared to $13.22 billion in the first half of last year.

However, looking at the monthly current account trends, the damage caused by COVID-19 appears to be improving. The current account surplus in June was $6.88 billion, the largest surplus in eight months since October 2019 ($7.83 billion). The surplus also increased compared to May ($2.29 billion surplus).

Exports in June amounted to $40.02 billion, marking the fourth consecutive month of decline year-on-year, but the rate of decline narrowed significantly from 28.2% in May to 9.3% in June. A Bank of Korea official stated, "Although export prices of semiconductors and petroleum products declined, exports to China turned to an increase, easing the year-on-year decline."

Imports also showed a moderated decline as capital goods and consumer goods imports increased despite weak energy prices. Imports in June were $34.15 billion, with the year-on-year decline narrowing from 24.8% in May to 9.8% in June.

The service account deficit was $1.26 billion, narrowing compared to -$2.14 billion in the same month last year. The travel deficit shrank by about $700 million from $1.13 billion in June last year to $420 million in June this year.

Meanwhile, despite COVID-19, major countries' stock markets showed a strong trend, and domestic investors' overseas stock investments continued to increase. Overseas securities investment by domestic investors in June was $4.76 billion, increasing for three consecutive months, of which overseas stock investment was $4.32 billion, marking 52 consecutive months of increase since March 2016.

Foreign investors' domestic stock investment turned to an increase after four consecutive months of decline as investment sentiment recovered. Foreigners' domestic bond investment in June was $4.12 billion, increasing for six consecutive months.

Looking at the financial account on a half-year basis, domestic investors' overseas stock investment in the first half of this year was $25.35 billion, ranking third highest on a half-year basis. The first place was the second half of 2007 with $26.46 billion, and the second place was the first half of 2007 with $26.1 billion. On the other hand, foreigners concentrated their investments on domestic bonds in the first half of this year. Foreigners' bond investment in the first half was $22.32 billion, showing the third largest increase ever.

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