Current Account Surplus in April After 3 Years...Exports and Freight Overwhelm Dividends (Comprehensive Report 2)

Bank of Korea 'April 2021 Balance of Payments (Provisional)'

[Image source=Yonhap News]

[Asia Economy Reporter Kim Eunbyeol] South Korea's current account balance for April defied expectations by recording a surplus. This marks the 12th consecutive month of surplus and the first April surplus in three years since April 2018. Typically, April sees a high likelihood of a deficit due to increased foreign dividend payments by companies, and this time, with special dividends from Samsung Electronics added, a current account deficit was anticipated. However, exports also rose significantly, enabling a surplus. This is another economic indicator demonstrating that the pace of global economic recovery is faster than expected.

According to the "April 2021 Balance of Payments (Provisional)" released by the Bank of Korea on the 8th, the current account balance for April recorded a surplus of $1.91 billion, turning positive compared to a deficit of $3.3 billion in the same month last year. Last April, the current account posted a record deficit due to a sharp decline in exports caused by lockdown measures worldwide amid the COVID-19 pandemic, combined with corporate dividend payments. This year, however, it turned to a surplus. Consequently, South Korea's current account has recorded a surplus for 12 consecutive months since May last year.

The surplus in the current account was largely driven by strong export performance. Exports reached $52.17 billion, an increase of $16.65 billion (46.9%) compared to $35.52 billion in the same period last year. Exports of petroleum products rose by 94.3%, passenger cars by 75.2%, chemical products by 48.6%, and semiconductors by 29.0%, all showing strong growth.

Imports also increased to $47.61 billion, up $12.79 billion (36.7%) from $34.82 billion in the same month last year. This rise was influenced by higher raw material prices, continued semiconductor facility investments, and expanded consumption of durable goods (home appliances and passenger cars), leading to increases in raw materials (40.7%), capital goods (28.5%), and consumer goods (28.0%). Since imports of raw materials used in production, capital goods linked to investment, and consumer goods all increased, it indicates that South Korea's investment and consumption are maintaining a healthy recovery trend. The trade balance surplus, the difference between exports and imports, was $4.56 billion, expanding the surplus by $3.86 billion compared to $700 million in the same period last year.

As global cargo volumes suddenly increased and shipping freight rates rose, the service account also improved. The service account recorded a surplus of $10 million in April, turning positive compared to the same month last year. The Shanghai Containerized Freight Index (SCFI) for April jumped 232.4% year-on-year, increasing maritime freight income and raising transportation income to $3.13 billion. Consequently, the transportation balance surplus expanded by $770 million year-on-year to $810 million.

The primary income account posted a deficit of $1.95 billion due to increased corporate dividend payments. However, the deficit was smaller than the $2.25 billion deficit in the same period last year, thanks to increased dividend income from domestic institutional investors. In the financial account, domestic investors' overseas direct investment increased by $4.33 billion, and foreign investment in South Korea rose by $2.6 billion. Overseas securities investment by domestic investors increased by $4.84 billion, marking the 13th consecutive month of growth, while foreign investment in domestic securities also rose for the fourth consecutive month to $6.13 billion. Notably, foreign investment in domestic stocks increased by $760 million, turning positive for the first time in five months.

Meanwhile, the current account surplus trend is expected to continue in May. Exports are maintaining their strong momentum, and the impact of corporate dividend payments is expected to decrease compared to April. Lee Seong-ho, head of the Bank of Korea's Financial Statistics Department, said, "May exports increased by 45.6% based on customs clearance data, showing a larger increase compared to 41.2% in April."

Seongho Lee, Head of the Financial Statistics Department at the Bank of Korea, is explaining the main features of the April 2021 balance of payments (provisional) at the Bank of Korea in Jung-gu, Seoul, on the morning of the 8th.

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