May Current Account Surplus of $10.76 Billion... 13 Consecutive Months of Surplus (Update)

Bank of Korea 'May 2021 Balance of Payments (Provisional)'

[Image source=Yonhap News]

[Asia Economy Reporter Eunbyeol Kim] South Korea's current account surplus in May recorded $10.76 billion, continuing a 13-month streak of surpluses.

According to the "May 2021 Balance of Payments (Provisional)" released by the Bank of Korea on the 7th, the current account surplus in May was $10.76 billion, an increase of $8.52 billion compared to the same month last year ($2.24 billion). This was due to a significant increase in exports amid economic recovery, which improved the goods balance, and a substantial expansion in the primary income account surplus. As a result, South Korea's current account has recorded surpluses for 13 consecutive months since May last year.

Both exports and imports improved amid the global economic recovery. Exports reached $50.35 billion, up $16.56 billion (49.0%) from the same period last year ($33.78 billion). Exports showed strong performance across most items and regions, marking seven consecutive months of year-on-year growth. Based on customs clearance data, petroleum product exports increased by 160.2%, passenger cars by 92.0%, chemical products by 58.8%, and semiconductors by 23.7%. Exports to the European Union (EU) rose by 62.8%, and to the United States by 62.5%.

Imports also increased to $43.98 billion, up $12.81 billion from the same month last year ($31.17 billion). Due to rising raw material prices, recovery in facility investment, and expanded consumption of durable goods (such as passenger cars), imports of raw materials, capital goods, and consumer goods all increased simultaneously. Raw material imports rose by 61.2% year-on-year, capital goods by 19.1%, and consumer goods imports by 29.2%.

Since imports of raw materials used in production, capital goods linked to investment, and consumer goods all increased, it can be seen that South Korea's investment and consumption are maintaining a favorable recovery trend. The goods balance surplus, which is the difference between exports and imports, was $6.37 billion, expanding by $3.75 billion compared to the same period last year ($2.61 billion).

As global cargo volumes suddenly increased and shipping freight rates rose, the services balance also continued to improve. The Shanghai Containerized Freight Index (SCFI) in May jumped 284.4% year-on-year, increasing maritime freight transport income, which raised transportation income to $3.57 billion. Accordingly, the transportation balance recorded a surplus of $1.19 billion, expanding by $1.05 billion compared to the same month last year. The services balance in May showed a deficit of $560 million, narrowing the deficit by $90 million compared to the same month last year. The services balance had recorded a surplus of $10 million in April.

The primary income account recorded a surplus of $5.49 billion as domestic companies earned dividend income from their overseas subsidiaries. This is nearly ten times the surplus compared to May last year ($550 million). Dividend income rose sharply to $5.75 billion from $1.24 billion in the same month last year.

In the financial account, domestic residents' overseas direct investment increased by $3.44 billion, and foreign investment in South Korea increased by $840 million. Domestic residents' overseas stock investment increased for 21 consecutive months, while foreign investors' domestic stock investment turned to a decrease again after two months.