Korea logs current account surplus for 16th month in August with robust exports of semiconductors
- Exports up $12.42 billion YOY - a 10th consecutive months of gains
Korea posted a current account surplus for the 16th straight month in August as exports of a majority of items, such as semiconductors and automobile remained robust amid the global economic recovery. According to the “Balance of International Payments in August 2021 (tentative)” released by the Bank of Korea on October 7th, the current account surplus reached $7.51 billion in August, which is an $870 million increase compared to the same period last year ？ resulting in a current account surplus for 16 consecutive months from May last year.
Exports in August rose 31.2 percent on-year by $12.42 billion to hit $52.2 billion, which is an increase uninterrupted for ten consecutive months achieved by a continuous and robust semiconductors and automobile exports. This is attributable to the global economic recovery, which resulted in a favorable export demand for most of Korea’s export items, including semiconductors and automobiles. Exports of petrochemical products saw a 53.9% increase and chemical products, steel products, semiconductors and passenger cars all saw an increase in exports by 49.5%, 47.9%, 41.5% and 16.5% respectively. During the same period, imports increased by $13.87 billion, a 42.4% increase, to reach $45.59 billion. This is attributable to surging import rates of raw materials and an increase in raw material, capital goods and consumer goods imports due to sustained investment in plants and equipment and expansion in consumption. Raw material imports rose by 79.1% with capital goods and consumer goods posting a 21.6% and 16.3% increase respectively. This resulted in a $1.45 billion reduction in goods balance compared to the performance of August last year, posting a $5.64 billion surplus in goods balance.
The service account logged a surplus of $1 billion in August. The August reading marked the largest-ever surplus in 12 years and 10 months since October 2008, when a $1.48 billion surplus was posted. The surplus of the service account was boosted by favorable performance of the transportation account. The transportation account hit a surplus of $1.52 billion, which is a $1.1 billion increase in surplus compared to the same period last year. The transportation account is enjoying a surplus for 14 consecutive months since July 2020, when a $10 million surplus was posted, due to higher revenue from maritime shipping. Shanghai Containerized Freight Index (SCFI) in August skyrocketed by 264.9% compared to a year ago. The tourism account saw a $610 million deficit, which is $190 million greater than the deficit posted a year ago at $420 million.
The primary income account, which tracks wages of foreign workers, interest and dividend payments overseas, logged a surplus of $1.11 billion in the month. This is a $410 million increase compared to the same period a year ago, which saw a surplus of $710 million. Such an increase is attributable to a considerable increase of dividend payments by overseas subsidiaries of Korean companies, resulting in an increase of $1.68 billion worth of dividend payment and the dividend payment account made a turnaround to post a $480 million surplus. Transfer income account saw a deficit of $230 million.
The capital and financial account, which covers cross-border investments, posted a net inflow of $5.8 billion in August. Foreigners’ investment in domestic securities saw a turnaround after three months since May with a $3.12 billion decrease in their investment. Foreigners’ investment in domestic stocks dwindled by $4.55 billion as they sold off stocks to yield profits, whereas their investment in bonds increased by $1.43 billion. Although this is an eight consecutive month increase since January, the size of increase contracted compared to August last year, which saw a $2.67 billion increase.
Korean nationals’ investment in overseas securities saw a 17 consecutive month increase since April 2020 with a $5.38 billion increase in their investments. The breakdown of this increase goes to $4.66 billion in stock investments and $720 million in bond investments. Their investment in overseas stocks and bonds rose for 24 consecutive months since September 2019 and two consecutive months respectively.
[This news is provided by Newsis]