The trade balance of goods is also the largest in history… Primary income balance offsets deficit
(Seoul = Yonhap Infomax) Reporter Gyu-sun Lee = In January, the current account recorded a deficit of 4.5 billion dollars. The goods account deficit led the current account deficit, reaching an all-time high of $7.5 billion.
However, the primary income account surplus, which reached a record high, partially offset the goods account deficit.
According to provisional balance of payments statistics released by the Bank of Korea on the 10th, the January current account deficit was recorded at 4.52 billion dollars. After a loss of $200 million in November last year, it showed a deficit again in two months. Compared to the surplus of $2.24 billion in the same month last year, the current account account decreased by $6.76 billion.
The goods balance recorded a deficit of $7.46 billion, down $9 billion from a year ago. It is the first deficit in 26 years since 1997 for four months in a row.
The trade deficit of $7.5 billion is the highest ever. The previous worst product account balance was a deficit of $4.1 billion in August of last year.
As exports (48 billion dollars) decreased and imports (55.46 billion dollars) increased, the goods account deficit deepened in January.
Exports in January plunged 14.9% year-on-year, mainly in semiconductors and steel, due to the global economic slowdown. Exports of semiconductors decreased by 43.4% compared to the same month last year, and exports of steel products decreased by 24%.
Imports in January increased by 1.1% year-on-year as imports of raw materials and capital goods decreased, but imports of consumer goods increased. Passenger car imports surged 65.9% year-on-year in January.
The service balance also recorded a deficit of 3.27 billion dollars, a 2.44 billion dollar increase from the same month last year.
The transport account (surplus of $120 million) maintained a surplus, but the size of the surplus decreased by $1.77 billion from January of last year ($1.89 billion in surplus). This is because the Shanghai Container Freight Index (SCFI) in January plunged 79.5% from a year ago.
In addition, the travel account deficit ($1.49 billion) also increased by $940 million from the previous year.
However, the primary income balance partially offset the deficit in the goods and services balance.
The primary income balance in January was a surplus of $6.38 billion, a surplus of $4.51 billion larger than a year ago. The primary income account surplus of $6.38 billion is also the highest ever.
Starting this year, domestic companies’ dividends from overseas subsidiaries are exempt from taxation (non-inclusion in gross income), and the primary income account surplus has soared.
The Bank of Korea expected the current account deficit to narrow in February.
Lee Dong-won, head of the Bank of Korea’s financial statistics department, said, “The trade deficit in February narrowed by $7.34 billion compared to January.
He added, “Semiconductors are sluggish, but exports of secondary batteries and passenger cars are robust, and exports excluding semiconductors have turned to an increase in five months.”
“There may be differences from month to month, but the annual primary income balance is expected to increase significantly due to the impact of corporate tax benefits,” he explained.
The travel balance is also expected to improve.
Kim Hwa-yong, head of the international balance of payments team at the Bank of Korea, said, “In February, the number of outbound travelers decreased slightly, while the number of inbound travelers increased.”
“Since February, the number of Chinese immigrants has been increasing. Visa restrictions and PCR (genetic amplification) tests have been removed, and air routes will be expanded,” he said.
Despite the worst current account balance in January, it was expected that the Bank of Korea would be able to achieve a current account deficit of 4.4 billion dollars in the first half, which was originally predicted by the Bank of Korea.
Director Lee Dong-won said, “It is difficult to say that the current account will be in the black in a short period of time, but the current account deficit of $4.4 billion for the first half of the year predicted at the end of February is a figure that reflects the worst-ever January trade balance. It didn’t deviate too much,” he said.
Bang Ki-seon, 1st Vice Minister of Strategy and Finance, also said at the emergency economic vice ministerial meeting, “As the trade deficit in February decreased considerably compared to January, the current account will improve to some extent.” A current account surplus of around $20 billion is expected,” he said.
In January, net assets in financial accounts decreased by $640 million.
As for direct investment, Koreans’ overseas investment increased by 1.77 billion dollars, and foreign domestic investment increased by 1.17 billion dollars.
In stock investment, Koreans’ overseas investment increased by 3.69 billion dollars, and foreigners’ domestic securities investment increased by 5.4 billion dollars. Overseas securities investment by Koreans has been on the rise for three consecutive months since November last year.
Derivatives shrank by $1.5 billion in January.
Other invested assets increased by $1.95 billion and liabilities increased by $4.38 billion.
Reserve assets increased by $4.41 billion.
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