2020 Gyeongsang Surplus of $75.28 Billion... Largest in 2 Years Despite COVID-19 (Comprehensive)

Bank of Korea 2020 Balance of Payments (Preliminary)
Goods Balance Improves as Imports Decline More Than Exports
Service Balance Deficit Narrows Due to COVID-19 Air Travel Restrictions

A container ship is loading cargo at Gammam Pier in Busan Port.
[Image source=Yonhap News]

[Asia Economy Reporter Eunbyeol Kim] Last year, the current account surplus reached $75.28 billion, expanding by $15.6 billion compared to the previous year. This is the largest current account surplus in two years since 2018 ($77.4665 billion). The surplus exceeded the Bank of Korea's initial annual forecast ($65 billion) by more than $10 billion. Although annual exports decreased due to the impact of COVID-19, the sharp drop in international oil prices led to a reduction in imports as well, improving the goods balance. The services balance also improved as overseas departures sharply declined due to the closure of air routes.

According to the "2020 Balance of Payments (provisional)" released by the Bank of Korea on the 5th, last year's goods balance was $81.95 billion, expanding by $2.13 billion compared to the previous year. Exports amounted to $516.6 billion, decreasing for the second consecutive year (-7.2%). Looking at customs-cleared exports, exports of petroleum products (-40.3%), passenger cars (-11.9%), and steel (-10.3%) declined, while exports of information and communication devices (13.0%) and semiconductors (5.4%) increased. A Bank of Korea official explained, "Exports decreased due to global production disruptions and reduced demand caused by the spread of COVID-19."

However, imports recorded $434.66 billion, down 8.8%, showing a larger decline than exports. Imports also decreased for the second consecutive year. The decline in international oil prices due to reduced global demand amid the COVID-19 shock significantly lowered raw material import prices.

A Bank of Korea official explained, "Looking at customs-based imports, raw material imports decreased by 18.8%, while capital goods imports increased by 7.4%, mainly due to semiconductor manufacturing equipment, and consumer goods imports decreased only slightly by 0.4%, so this is not what is called a 'recession-type surplus.'"

The services balance deficit was $16.19 billion, narrowing by $10.66 billion compared to the previous year. The reduction in the number of travelers due to international travel restrictions caused travel payments to decrease much more than travel income. From January to November, the cumulative number of departures was 4.2 million, down 84.1% from the previous year, resulting in a travel balance deficit of $5.63 billion. In 2019, the travel balance deficit was $11.87 billion.

Although revenue from air passengers decreased, income from cargo transportation increased, turning the transportation balance ($2.13 billion) into a surplus for the first time in five years since 2015 ($4.65 billion).

The primary income balance, which shows inflows and outflows of wages, dividends, and interest, was $12.05 billion, the second highest ever. Previously, in 2019, the primary income balance recorded the highest ever at $12.86 billion. This was due to reduced dividend income from overseas local subsidiaries amid the COVID-19 impact.

Last year, as the global stock market performed well due to massive monetary easing worldwide amid the COVID-19 shock, the number of "Seohak Gaemi" (domestic individual investors purchasing overseas stocks) surged, resulting in the largest-ever annual domestic investment in overseas stocks ($56.33 billion). On the other hand, foreign investors' investment in domestic stocks turned negative (-$15.8 billion), while foreign investment in domestic bonds was $32.85 billion, the second highest ever.

Meanwhile, the current account surplus in December last year was $11.51 billion, marking the seventh consecutive month of expansion compared to the same month of the previous year. After two months since October last year ($11.55 billion), the monthly current account surplus again exceeded $10 billion. Exports increased for the second consecutive month by 10.3% to $52.59 billion, led by semiconductors, information and communication devices, and chemical products. Imports remained steady at $42.09 billion compared to the same month of the previous year.

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