South Korea's current account surplus hits record as domestic demand stays weak
Reuters in Seoul
South Korea’s current account surplus surged to a record high last month as exports grew more than imports, official data showed on Thursday, underscoring still-weak domestic demand while adding to upward pressures on the won.
Asia’s fourth-largest economy posted a current account surplus of US$7.92 billion on a seasonally adjusted basis, up sharply from a revised US$4.93 billion surplus in September, the Bank of Korea data showed.
So far this year, the current account surplus has reached US$58.26 billion before seasonal adjustment, on course for a record US$63 billion surplus for the whole of the year, as forecast by the central bank.
“The current account surplus will likely continue through next year, although the amount will decrease to 4 per cent of gross domestic product from a 5 per cent level this year,” said Suh Dae-il, an economist at KDB Daewoo Securities.
South Korea’s annual GDP reached US$1.13 trillion last year and will likely grow to nearly US$1.2 trillion this year.
“The continued surplus will spur the won’s appreciation, although the won needs stronger economic growth to break above the 1,000 mark [per US dollar],” Suh said.
The won is up only 0.9 per cent against the US dollar this year to date, but it has risen a whopping 7.6 per cent since the end of June.
Exports grew 4.4 per cent from September to a record US$50.17 billion on a seasonally adjusted basis, while imports rose 1.9 per cent to US$43.92 billion, the central bank data showed.
Relatively weak imports reflected still-depressed domestic demand as households prefer to save more and pay back debt instead of spending on cars or homes.
South Korea has posted a current account surplus every month since early 2009.
Without adjustment for seasonal patterns, the current account surplus last month was US$9.51 billion, also a record, up from US$6.54 billion in September, the data showed.
On the financial account, South Korea saw a net outflow of US$10.09 billion in October, compared with a net outflow of US$4.54 billion in the previous month.