Bank of Korea Explains January Balance of Payments (Provisional)
Surplus Shrinks Sharply Due to Seasonal Factors
Forecasts "Surplus Will Expand in February"
Tariff Uncertainties and IT Exports Affect Outlook
The Bank of Korea attributed the sharp decline in the current account surplus in January to seasonal factors and forecasted that "the surplus will expand in February."
Song Jae-chang, Head of the Financial Statistics Department, is explaining the main features of the January 2025 balance of payments (provisional) at the Bank of Korea in Jung-gu, Seoul, on the morning of the 7th. Provided by the Bank of Korea.
On the 7th, Song Jae-chang, head of the Financial Statistics Department, explained this at the briefing on the 'January Balance of Payments (provisional)'. The current account surplus in January was $2.94 billion, continuing a surplus streak for 21 consecutive months, but it shrank to about one-quarter of the previous month’s figure ($12.37 billion) in just one month. Compared to January last year ($3.05 billion), it also decreased by $110 million.
Song said, "Compared to the previous month, the surplus shrank significantly, mainly due to the goods balance," adding, "Typically, in January, the trade balance tends to shrink due to a base effect from concentrated exports at the end of the year, and this year, the reduction in working days caused by the Lunar New Year holiday moving to January further contributed to the contraction in the surplus compared to both the same month last year and the previous month."
He continued, "Due to seasonal factors at the end and beginning of the year, the surplus decreased compared to December last year and showed a sharp monthly drop, but the trend still shows a steady current account surplus flow."
Regarding the forecast for the current account in February, he expected "the surplus to expand." Song stated, "The customs-based trade surplus was $1.86 billion in January but recorded a $4.3 billion surplus in February," adding, "A goods surplus is also expected in the current account, and the surplus trend will continue." He further noted, "Overall for this year, the surplus is expected to shrink compared to last year, but the increase in IT exports is expected to continue." However, he anticipated weakness in the non-IT sector due to the global supply expansion of Chinese products and the possibility of tariff increases on major items.
Regarding whether the tariff policies initiated by Trump have affected exports or the current account differently, he said, "It is clear that they will act as a factor slowing exports," adding, "The conflicts and negotiation phases among major trading countries have not been resolved and are ongoing, which increases uncertainty."
Song said, "Since a 25% tariff is imposed on domestic steel and aluminum, and there have been mentions of tariff increases on automobiles, there will likely be direct impacts," adding, "This will lead to weakened price competitiveness in the U.S. market, and if domestic companies increase local production in the U.S., exports may decrease." He also forecasted, "Tariffs on Mexico and Canada will naturally impact the operations of companies with factories located overseas."
He added, "However, tariff policies change daily, and depending on the responses of neighboring countries, negotiations could go well and ease the situation. Conversely, retaliatory tariffs could also be imposed, so while the impact on exports is negative, it is necessary to monitor policy changes further."
Regarding the $4.55 billion decrease in reserve assets in January, he explained, "This was the largest decline since the $5.05 billion decrease in April last year," adding, "The foreign exchange reserves balance decreased by $4.59 billion in January, and after removing the effects of exchange rate fluctuations and excluding gains or losses from bond transactions, the decrease was due purely to transactional factors."
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