August Current Account Deficit of $3.05 Billion... First Since February 2012 Except April

[Image source=Yonhap News]

[Asia Economy Reporter Seo So-jeong] The current account balance turned to a deficit in August due to rising international commodity prices and sluggish exports to China. Except for every April when overseas remittance dividends increase, the last time South Korea's current account showed a deficit was in February 2012.

According to the "August Balance of Payments (provisional)" announced by the Bank of Korea on the 7th, the domestic current account recorded a deficit of $3.05 billion, turning to a deficit. Compared to the same month last year, this is a decrease of $10.49 billion. The current account posted a deficit of $79 million in April, then increased its surplus to $3.86 billion in May and $5.61 billion in June, but the surplus sharply decreased to $790 million in July before turning to a deficit in August.

Within the current account, the goods balance recorded a deficit of $4.45 billion, turning from a surplus of $6.03 billion in the same month last year to a deficit. It decreased sharply by $10.48 billion compared to the previous year, continuing a deficit for two consecutive months following July. During this period, exports increased by $4.1 billion to $57.28 billion, but imports rose to $61.73 billion, resulting in a negative goods balance.

The Bank of Korea explained, "Exports, centered on petroleum products, increased for 22 consecutive months compared to the same month last year, but the growth rate narrowed due to a decrease in exports to China. Imports also increased for 20 consecutive months compared to the same month last year, driven by a surge in raw material imports and expansion in capital goods and consumer goods."

The services balance, which showed a surplus in July, also turned to a deficit. Due to increased payments for intellectual property rights usage fees, it shifted from a surplus of $840 million in the same month last year to a deficit of $770 million.

The primary income balance, which reflects inflows and outflows of wages, dividends, and interest, recorded $2.24 billion, expanding its surplus by $1.6 billion compared to the same month last year. The secondary income balance recorded a deficit of $70 million.

The net financial account, which is assets minus liabilities, decreased by $610 million in August. In direct investment, domestic investors' overseas investments increased by $3.6 billion, and foreign investors' domestic investments increased by $1.81 billion. Domestic investors' overseas securities investment rose by $610 million, and foreign investors' domestic securities investment expanded by $2.59 billion.

The Bank of Korea stated, "Foreign investors' domestic stock investments turned to an increase influenced by improved investment sentiment due to the decline in international oil prices, while bond investments turned to a decrease due to reduced arbitrage incentives."

Regarding the outlook for the current account, the Bank of Korea said, "The August current account recorded a deficit due to the unusually large trade deficit (-$9.49 billion), but with the trade deficit significantly narrowing to -$3.77 billion in September, the current account is likely to show a surplus in September."

It added, "Going forward, the current account will mainly be influenced by the recently highly volatile trade balance trend. While a surplus trend is expected to be maintained annually, high monthly volatility is likely to continue due to increased external uncertainties."

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