SEOUL, July 30 (Korea Bizwire) – Amid an enviable situation of the rising current account surplus, a controversy broke out that claims the rising surplus is a worrisome sign. According to this argument, the rising current account surplus is largely due to weak domestic consumption and a fall in imports, rather than an indication of Korean industry’s strength.
To this, the Bank of Korea, the very agency that compiles and announces current account statistics, countered that this is in no way a negative sign, given the latest rising trend in imports. Chung Young-taek, Bank of Korea’s director in charge of economic statistics, said on July 29, “This is far from a current account surplus that may emerge during a time of recession.”
On the same day, the central bank released current account data and said the current account balance for the month of June was a surplus of $7.92 billion. This is a surplus rally for 28 consecutive months since March 2012. During the first six months of this year, the current account surplus was a record-high level of US$39.2 billion, up 25.4 percent from the same period a year ago.
Bank of Korea’s Chung commented, “The biggest reason for the surplus was brisk exports above all. That’s because the global economy recovers, with Korean export items gaining non-price competitiveness.”
But private economic think tanks beg to differ. In a research report “Shift in Korean Economy’s Current Account Structure” published in June, Hyundai Economic Research Institute said, “The current account surplus rises principally because imports fall while exports rise but very slowly. This is a typical case of recessionary-type current account surplus.” This is a view in support of the rising current account surplus due to weak domestic consumption.
Lee Chang-seon, research fellow with LG Economic Research Institute, said, “Although the fall in imports was partly because of lowered international primary goods prices, weak domestic spending including investment and consumption is more to blame.”
By Sean Chung (email@example.com)