April Current Account Deficit $3.12 Billion... Largest Deficit in 111 Months (Update)

Bank of Korea April 2020 Balance of Payments (Preliminary)

[Image source=Yonhap News]

[Asia Economy Reporter Eunbyeol Kim] In April, when the novel coronavirus disease (COVID-19) spread and countries worldwide entered lockdown measures, South Korea's current account recorded its largest deficit in 111 months.

According to the "April 2020 Balance of Payments (Provisional)" released by the Bank of Korea on the 4th, the current account deficit in April was $3.12 billion. This marked another deficit after one year since April last year, and the deficit size was the largest in 111 months since January 2011 ($3.16 billion).

The cause was a sharp decline in export volumes to the US and Europe, along with a drop in export unit prices for semiconductors and chemical products, which significantly reduced the surplus in the goods balance.

Exports in April amounted to $36.39 billion, decreasing for two consecutive months compared to the same month last year. The export volume was the smallest in 122 months since February 2010. Imports also decreased for two consecutive months compared to the same month last year, totaling $35.57 billion. The sharp drop in oil prices led to a notable decrease in raw material imports, especially crude oil.

However, the goods balance remained positive at $820 million. Although the trade balance based on customs clearance was negative for the first time in 99 months in April, it turned positive due to additional factors such as overseas production and ships.

The services balance recorded a deficit of $1.42 billion, with the deficit widening by $150 million compared to the same month last year. The deficit was also larger than the previous month’s March services deficit (-$1.39 billion). Recently, the services balance had shown improvement as fewer Koreans traveled abroad due to COVID-19, but in April, the deficit in intellectual property rights usage fees worsened due to a decrease in trademark and patent royalty receipts from major IT companies, negatively impacting the balance.

Dividend income payments in April were $4.52 billion. This increase was due to the concentration of dividend payments from year-end closing corporations in April. However, payments were lower than the same month last year ($6.7 billion) due to deteriorated profitability of major domestic companies last year. The primary income balance, which includes dividend income, recorded a deficit of $2.29 billion, with the deficit narrowing by $1.9 billion compared to the same month last year.