South Korean current account surplus surges to new record in April

Exports soar but sluggish imports underscore weak domestic consumption and investment

PUBLISHED : Friday, 30 May, 2014, 1:10am
UPDATED : Friday, 30 May, 2014, 1:40am

South Korea's current account surplus surged to a record in April as exports rose sharply, central bank data showed yesterday, but a fall in imports reinforced a worrying erosion in its domestic consumption.

Asia's fourth-largest economy posted a current account surplus of US$9.81 billion in April on a seasonally adjusted basis, much bigger than a revised surplus of US$6.6 billion for March, data from the Bank of Korea showed.

Exports rose by a seasonally adjusted 5.9 per cent to US$55.38 billion from March on shipments of cars, petroleum and steel products, while imports fell 3.7 per cent to US$43.46 billion, bringing the goods account surplus to a record US$11.92 billion.

Sluggish imports underscored depressed domestic consumption and investment, and weakness in global prices of energy and raw materials.

"As local companies' investments and domestic spending stay soft, the current account surplus will be maintained through the fourth quarter, but the surplus will narrow around then as the global economy gains traction," said Park Sang-hyun, chief economist at HI Investment & Securities in Seoul.

Highlighting soft demand at home, a recent consumer sentiment survey by the central bank found it had fallen to an eight-month low.

An economic slowdown in China, South Korea's biggest export market, and an uneven recovery in the global economy have largely cooled investor sentiment.

South Korea's economy is expected to grow 4 per cent this year, from 3 per cent last year, helped by improving exports, but the weak domestic picture could slow the recovery.

The robust current account surplus is expected to lend further support to the Korean won, which is up 3.3 per cent against the US dollar this year.

The authorities intervened in the market earlier this month as the won's gains accelerated thanks to a record run of current account surpluses and a rush of foreign investment into stocks and bonds.

According to the central bank data, foreign net portfolio investment jumped to US$5.85 billion in April from US$150 million in March. Net outflows of US$6.24 billion in April compared to a revised figure of US$5.78 billion in March.