Successful Turn to Surplus but Surplus Margin Decreases by $6.55 Billion
Continued Decline in Goods Trade Surplus Margin
In May, South Korea's current account recorded a surplus of $3.86 billion, returning to surplus after one month. However, the surplus narrowed significantly by more than $6.5 billion compared to a year ago due to rising import prices of raw materials such as oil.
According to the preliminary balance of payments statistics released by the Bank of Korea on the 7th, the current account surplus in May this year was $3.86 billion. In the previous month of April, there was a deficit of $80 million, marking the first negative balance in two years since April 2020, but it turned back to surplus within a month.
However, the size of the surplus sharply decreased by $6.55 billion compared to $10.41 billion in the same month last year. This was largely due to the reduction in the goods account surplus, which accounts for the largest portion of the current account, shrinking from $6.65 billion to $2.74 billion in May.
The decrease in the goods account surplus was because imports grew faster than exports. Exports ($61.7 billion) showed a solid trend with petroleum products, chemical products, and semiconductors increasing by $10.5 billion compared to the same month last year, but imports ($58.96 billion) increased by $14.41 billion due to simultaneous expansion of raw materials, capital goods, and consumer goods.
The services account recorded a deficit of $20 million, turning negative for the first time in four months since January this year (-$490 million). The deficit size decreased by $720 million compared to last year when the COVID-19 spread was severe. Within the services account, the transportation account surplus expanded by $410 million due to high export freight rates, but surpluses in processing services, travel, and other business services declined.
The primary income account, which shows inflows and outflows of wages, dividends, and interest, recorded a surplus of $1.45 billion, shrinking by $3.58 billion from $5.03 billion in the same month last year. The dividend income surplus significantly decreased from $4.22 billion to $520 million over one year, which the Bank of Korea explained as a base effect due to a one-time large dividend income in May last year. The secondary income account recorded a deficit of $320 million.
The net financial account, which is assets minus liabilities, increased by $3.03 billion in May. In direct investment, domestic investors' overseas investment increased by $5.47 billion, and foreign investors' domestic investment increased by $1.37 billion. In securities investment, domestic investors' overseas investment increased by $7.13 billion, and foreign investors' domestic securities investment increased by $2.46 billion.
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