November Current Account Deficit of $620 Million... Deficit Returns After Three Months

[Image source=Yonhap News]

[Asia Economy Reporter Seo So-jeong] The current account balance turned to a deficit again in November after three months. This was due to a sharp decline in exports caused by the global economic slowdown, resulting in a $7.64 billion decrease in the goods balance compared to the same month last year.

According to the "November Balance of Payments (provisional)" released by the Bank of Korea on the 10th, the domestic current account recorded a deficit of $620 million. The goods balance shifted from a $6.07 billion surplus in the same month last year to a $1.57 billion deficit.

The current account maintained a surplus for 23 consecutive months from May 2020 until March this year, then posted a $79.3 million deficit in April, followed by surpluses of $3.8599 billion in May and $5.698 billion in June. However, the surplus sharply decreased to $791.1 million in July and turned into a deficit of $3.0491 billion in August. It barely returned to a surplus of $1.5833 billion in September and maintained surpluses for two consecutive months with $880 million in October, but these were marginal surpluses.

The cumulative current account surplus from January to November this year was $24.37 billion, narrowing by $57.87 billion compared to the same period last year.

By detailed items, the goods balance showed a deficit of $1.57 billion, a sharp decrease of $7.64 billion compared to the same month last year, marking a deficit for two consecutive months. During this period, exports amounted to $52.32 billion, down $7.31 billion (12.3%) from the same month last year. Exports declined for three consecutive months due to the global economic slowdown, mainly in semiconductors, ships, and chemical products.

On the other hand, imports ($53.88 billion) increased by $320 million (0.6%) compared to the same month last year. Imports of raw materials, capital goods, and consumer goods rose by 4.8%, 0.4%, and 0.7%, respectively.

The services balance recorded a deficit of $340 million as the surplus in transportation services shrank. The deficit in the services balance widened by $70 million compared to the same month last year.

The net financial account, which is assets minus liabilities, increased by $1.85 billion. In direct investment, domestic investors' overseas investments increased by $3.24 billion, and foreign investors' domestic investments rose by $550 million.

Domestic investors' overseas securities investment increased by $4.08 billion, marking a turnaround to growth for the first time in three months since August last year ($610 million). Overseas stock investments increased due to expectations of easing monetary tightening in major countries, while bond investments decreased mainly among funds and other financial institutions.

Foreign investors' domestic securities investment increased by $1.49 billion, continuing a five-month consecutive increase since July last year. Foreign investors' domestic stock investments rose due to expectations of the U.S. Federal Reserve (Fed) slowing the pace of interest rate hikes and China's easing of zero-COVID policies, while bond investments decreased mainly in short-term bonds.

The Bank of Korea had forecasted a current account surplus of $25 billion for this year in its revised economic outlook last November. Considering the cumulative current account surplus of $24.37 billion from January to November, if the current account records a deficit in December following November, it is likely that the forecast will be difficult to achieve.

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