KDI Lowers Current Account Surplus Forecast to $16 Billion This Year... "Impact of Rising International Oil Prices and Falling Semiconductor Prices"

Recent Factors Affecting the Current Account Balance and Implications
Surplus Scale Revised Downward Again After 3 Months

The Korea Development Institute (KDI) has revised down its forecast for this year’s current account surplus to $16 billion. This is due to the expectation that rising crude oil and raw material prices, along with a global economic slowdown causing price declines in semiconductors and other products, will reduce the current account balance.

On the 3rd, KDI announced this in its report titled "Recent Factors Affecting the Current Account and Implications."

KDI projected that in the first half of the year, the current account deficit will reach $10 billion as the global economy remains sluggish while domestic demand shows relatively favorable trends. However, in the second half, with the global economy recovering and the slowdown in domestic demand growth, factors supporting an increase in the current account will become visible, resulting in a surplus of $26 billion. Overall, the current account surplus for the year is expected to be $16 billion.

In February this year, KDI had revised its forecast upward from $16 billion to $27.5 billion, reflecting an upward adjustment in export growth rates and a wider decline in import prices due to falling international oil prices, but it has now lowered the forecast again within three months.

Kim Junhyung, Associate Research Fellow at KDI’s Economic Outlook Division, explained, "The recent decline in the current account is analyzed as a phenomenon caused by sustained expenditure growth despite income decreases due to worsening external conditions." He added, "In 2023, as the global economy continues to be sluggish while domestic demand maintains a relatively high growth rate, the current account surplus is expected to shrink to 1.0% of gross domestic product (GDP)."

KDI stated that, theoretically, it is difficult to conclude that a current account surplus or deficit in itself is problematic. However, fluctuations in the current account affect net external assets, so if a current account deficit persists for a long time, it could impact external soundness. Kim noted, "Considering the current external soundness of our economy, the possibility of a sharp contraction in the foreign exchange market due to a decline in the current account is low. It is deemed desirable that macroeconomic policy is not overly influenced by short-term fluctuations in the current account."

Kim Jun-hyung, Associate Research Fellow at the KDI Economic Outlook Office, is explaining 'Recent Factors Affecting the Current Account Balance and Implications' at the Government Complex Sejong on the 3rd.