Sundae Foreign Financial Assets Reach Record High of $746.6 Billion... "External Soundness Also Favorable"

[Image source=Yonhap News]

As of the end of last year, South Korea's net external financial assets (external financial assets minus external financial liabilities), which indicate the country's payment capacity, reached a record high of 746.6 billion USD, increasing by 87 billion USD compared to the previous year.

Additionally, the proportion of short-term external debt, which reflects the soundness of external debt, decreased by 1.0 percentage point compared to the end of the previous year, falling to the lowest level since the end of 1998.

According to the '2022 International Investment Position' released by the Bank of Korea on the 22nd, South Korea's net external financial assets stood at 744.6 billion USD at the end of last year, an increase of 87 billion USD from the previous quarter.

External financial assets amounted to 2.1271 trillion USD, down by 51.3 billion USD, while external financial liabilities also decreased by 138.3 billion USD to 1.3805 trillion USD.

Among external financial assets, residents' securities investments decreased by 95.4 billion USD due to non-transaction factors such as global stock price declines and depreciation of major currencies against the US dollar. Among external financial liabilities, foreigners' securities investments decreased by 182.1 billion USD due to domestic stock price declines and depreciation of the Korean won against the US dollar.

Net external claims amounted to 361.2 billion USD, a decrease of 86.8 billion USD from the previous year. External claims (1.0257 trillion USD) decreased by 54.7 billion USD mainly due to reserve assets, while external liabilities (664.5 billion USD) increased by 32.1 billion USD, mainly due to debt securities of the general government and deposit-taking institutions, reaching a record high.

The Ministry of Economy and Finance evaluated the decrease in net external claims in the data released that day by stating, "Although both long- and short-term external debts increased compared to the previous year, the overall growth rate of total external debt has slowed," and "the banks' ability to repay external debt has also greatly improved."

The 'short-term external debt ratio,' which is the ratio of short-term external debt to reserve assets indicating external payment capacity, was 39.4%, up 3.8 percentage points from the end of the previous year. The increase in the short-term external debt ratio was due to a 2 billion USD increase in short-term external debt (numerator) and a 40 billion USD decrease in reserve assets (denominator).

Yoo Bok-geun, head of the Bank of Korea's Overseas Investment Statistics Team, explained, "The short-term external debt ratio reached 78.4% in the third quarter of 2008 during the global financial crisis, and was 41.9% and 41.0% in the second and third quarters of last year, respectively. Compared to these, the current level is low."

Also, the 'short-term external debt proportion,' which is the share of short-term external debt within total external liabilities and indicates external debt soundness, was 25.1%, down 1.0 percentage point from the end of the previous year.

Mr. Yoo said, "The short-term external debt proportion recorded the lowest level since the end of 1998 at 23.3%, as the maturity structure of external debt has lengthened. When comprehensively assessing South Korea's external soundness in terms of payment capacity and external debt soundness, it is generally favorable."

The Ministry of Economy and Finance stated, "We will continue to strengthen efforts to manage external soundness by closely monitoring trends in capital inflows and outflows, maturity structure trends, and their impact on the foreign exchange market."

It added, "Given the ongoing uncertainties in international financial markets, we will closely monitor external debt trends through cooperation among related agencies," emphasizing that especially this year, with a large-scale maturity of foreign currency bonds (41.6 billion USD) approaching, management of repayment and refinancing risks will be strengthened.

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