South Korea’s current account balance has turned to black after it posted a slight deficit in April on the back of dividends paid to foreign stock investors.
The Bank of Korea said Monday that Korea’s current account posted a surplus of $4.95 billion in May after a deficit of $660 million in April.
The trade balance recorded a surplus of $5.39 billion, the smallest figure since $3.67 billion in January 2014. Weakening global trade volume and falling memory chip prices led to a shrinking trade surplus. Customs-cleared semiconductor exports plunged 29.2% in May in the wake of falling memory chip prices.
The service balance posted a deficit of $900 million, the smallest deficit since a deficit of $660 million in December 2016. The service balance improved thanks to increasing foreign tourists.
The primary income account, which caused the current account deficit in the previous month due to dividend payment to foreign investors, posted a surplus of $1.16 billion. Dividend payout to foreigners reached $6.78 billion in April.
The primary income account indicates the difference between income, such as wages and investment income earned by Koreans abroad and earned by foreigners in Korea.
In the financial accounts representing capital outflows, Korea’s net assets rose by $4.55 billion, which means the country’s assets rose more than liabilities
Overseas securities investment by Koreans rose $2.66 billion, while domestic securities investment by foreigners rose $3.59 billion.
The central bank expects the current account to post a surplus of $24.5 billion in the first half and $42 billion in the second half of this year. But, current account surplus in January to May only posted $15.5 billion.
Therefore, the BOK is likely to revise down its current account forecast soon.
The Ministry of Finance downgraded this year’s current account surplus to $60.5 billion from $63.5 billion estimated early this year, citing weak exports caused by the worsening external condition driven by the prolonged US-China trade war.