[Weekly Outlook] Will the Current Account Turn Surplus... Employment Growth Also in Focus

Bank of Korea Announces September Balance of Payments... Deficit in August
Employment Focused Amid Growing Domestic and Global Uncertainties
If Employment Growth Slows in October, Five Consecutive Months of Decline

The view of Busan Port's Sinsundae and Gamman docks [Image source=Yonhap News]

As high-intensity tightening by major countries including the United States increases domestic and international economic uncertainty, next week will see the release of South Korea's employment market trends and current account balance.

According to relevant ministries on the 6th, Statistics Korea will announce the 'October Employment Trends' on the 9th. While the number of employed persons is increasing mainly in manufacturing and other sectors, the overall positive trend is weakening, drawing attention to how much the growth rate has decreased this month.

In September, the number of employed persons was 28,389,000, an increase of 707,000 compared to a year earlier, but the growth rate has declined for four consecutive months since May. Compared to the previous month, it was the lowest increase since November last year (553,000).

By age group, those aged 60 and over increased by 451,000, accounting for 63.8%, well over half of the total increase in employed persons. In contrast, the 40s age group began to see a significant slowdown in growth from June, continuing a decline for three consecutive months in July, August, and September.

Since the economy is expected to worsen next year, the increase in employed persons is also expected to weaken further.

The Bank of Korea will release the 'September Balance of Payments (provisional)' statistics on the 8th.

In August, the current account recorded a deficit of 3.05 billion dollars. The current account had maintained a surplus for 23 consecutive months from May 2020 until March this year, then recorded a deficit in April, quickly returned to surplus in May, but switched back to a deficit after four months.

The deficit was influenced by a goods trade deficit of 4.45 billion dollars. Exports (57.28 billion dollars) increased by 7.7%, but imports (61.73 billion dollars) surged by 30.9%, continuing the deficit.

However, the Bank of Korea expects the current account to return to surplus in September. The Bank stated last month regarding the current account outlook, "Since the trade deficit (-3.77 billion dollars) significantly narrowed in September, the current account is likely to be in surplus."

Seoul Jung-gu Hana Bank dealing room. Photo by Hyunmin Kim kimhyun81@

The Korea Development Institute (KDI), a government-funded research institute, will announce the economic outlook for the second half of the year on the 10th. Given that South Korea and major countries such as the United States are rapidly raising benchmark interest rates, the outlook is likely to be gloomier than before.

The U.S. Federal Reserve (Fed) implemented another 'Giant Step' (a 0.75 percentage point increase in the benchmark interest rate) on the 2nd (local time), increasing the burden of domestic capital outflows and the rise of the won-dollar exchange rate.

With economic growth slowing, continued tightening in the bond market, and exports not recovering, many forecasts predict the economy will worsen next year.

Meanwhile, the Financial Services Commission and the Financial Supervisory Service plan to actively execute the Bond Market Stabilization Fund next week and hold frequent market inspection meetings by financial sectors.

The government has introduced measures such as expanding the liquidity supply program to a scale of '50 trillion won + α' to prevent liquidity tightening in the money market, but there are still complaints in the bond market that funds have dried up due to the Bank of Korea's successive benchmark interest rate hikes.