April Current Account Deficit of $80 Million... Deficit Returns After 24 Months

[Image source=Yonhap News]

[Asia Economy Reporter Seo So-jeong] Due to the sharp rise in raw material import prices, the surplus in the goods balance has decreased, and dividend payments to foreign investors have concentrated, causing South Korea's current account to turn to a deficit in April. As the fiscal balance, an indicator of the soundness of national finances, also deepened its deficit, concerns are growing that a 'twin deficit' situation, unseen in 25 years, may become a reality.

According to the preliminary balance of payments statistics announced by the Bank of Korea on the 10th, the current account recorded a deficit of 80 million dollars in April, marking a deficit for the first time in 24 months since a 4.02 billion dollar deficit in April 2020.

The current account had maintained a surplus for 23 consecutive months from May 2020 through March, but the surplus gradually shrank, and in April, concentrated dividend payments by fiscal year-end corporations overseas led to a deficit. In particular, although exports showed a solid trend, the larger increase in imports, centered on raw materials, influenced the shift to a deficit.

The goods balance surplus was 2.95 billion dollars, shrinking by 2 billion dollars compared to the same month last year. Exports of major items such as semiconductors and petroleum products showed a solid trend, increasing by 11.2% to 58.93 billion dollars, but imports rose by 16.5% to 55.98 billion dollars.

Especially, based on April customs clearance data, raw material imports increased by 37.8% compared to the same month last year.

Due to dividend payments by foreign-invested companies, the primary income balance recorded a deficit of 3.25 billion dollars. The deficit size narrowed from 3.91 billion dollars in the same month last year to 3.25 billion dollars. The April current account deficit is largely due to seasonal factors, such as concentrated dividend payments to foreign investors of domestic listed companies like Samsung Electronics.

On the bright side, the service balance, which was a deficit factor, turned from a 13 million dollar deficit in the same month last year to a 57 million dollar surplus, supported by a favorable transportation balance.

The net financial account assets (assets minus liabilities) increased by 1.7 billion dollars in April. In direct investment, domestic investors' overseas investment increased by 5.7 billion dollars, and foreign investors' domestic investment increased by 80 million dollars. In securities investment, domestic investors' overseas investment increased by 7.2 billion dollars, but foreign investors' domestic securities investment decreased by 1.69 billion dollars.

The Bank of Korea stated, "In April, dividend payments by fiscal year-end corporations were concentrated, and the Ukraine crisis also began to have a full impact, causing the current account to temporarily turn to a deficit," adding, "However, exports are steadily increasing, so the trend of a surplus flow is expected to continue."

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