Current Account Surplus for 18 Consecutive Months... Scale Shrinks Due to Rising Raw Material Prices (Comprehensive)

October 7 Announcement of 'October 2021 International Balance of Payments (Preliminary)'
Possibility of Achieving Annual Surplus of $92 Billion Increases

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] Thanks to the transport balance surplus reaching an all-time high, the current account balance recorded a surplus for 18 consecutive months last month. However, due to rising prices of crude oil and raw materials, imports increased more than exports, causing the surplus to decrease by 4.6 billion dollars compared to the same month last year.

According to the “October 2021 Balance of Payments (Provisional)” announced by the Bank of Korea on the 7th, the current account balance in October recorded a surplus of 6.95 billion dollars. This marks 18 consecutive months of surplus since May last year. However, the surplus amount decreased by 4.61 billion dollars compared to October last year.

Among the current account components, the goods balance was 5.64 billion dollars, which is about half compared to the same period last year (10.17 billion dollars). Exports in October increased by 9.38 billion dollars year-on-year to 55.97 billion dollars, while imports increased by 13.91 billion dollars to 50.34 billion dollars. Despite the increase in exports, the larger rise in imports reduced the surplus margin.

The decrease in the goods balance surplus was influenced by the sharp rise in energy prices. The price of crude oil imported by Korea was 77.8 dollars per barrel in October, a surge of 80.2% compared to the same month last year. Natural gas also rose by 142.2% during the same period to 668 dollars per ton.

Lee Seong-ho, head of the Financial Statistics Department at the Bank of Korea, explained, "The sharp increase in raw material prices and expanded consumption of imported food were significant," adding, "Since the rise in energy prices is considerable, the difference between total exports and total imports is expected to continue."

The transport balance surplus reached an all-time high of 2.22 billion dollars. Accordingly, the service balance recorded a surplus of 630 million dollars. The financial account, which compares foreign investment in Korea and domestic investment abroad, showed a net asset increase of 7.01 billion dollars. In terms of direct investment, domestic investment abroad increased by 7.72 billion dollars, marking an all-time high. Foreign direct investment in Korea increased by 3 billion dollars.

Despite the decrease in the balance of payments surplus last month, the cumulative surplus from the beginning of this year through October reached 77.07 billion dollars, the highest in five years.

The Bank of Korea holds the view that achieving the annual current account surplus forecast of 92 billion dollars is possible. Lee said, "If a surplus of about 15 billion dollars is generated in the remaining two months, it can be achieved."

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