Export slump reduces current account surplus

South Korea enjoyed a current account surplus for the 36th consecutive month, even as exports fell by 15.4 percent on-year in February, the Bank of Korea said Thursday.

According to the 2015 balance of international payments held by the BOK, Korea posted a current account surplus of $6.44 billion in February. Exports and imports came to $40.6 billion and $33.2 billion, respectively.

Despite slowing exports, the surplus was due to a sharp drop in imports, which posted a 21.9 percent decline.

Last year, exports’ contribution to gross domestic product dropped to a five-year low of 45.5 percent, since it plummeted to minus 28.6 percent in 2009 during the global financial crisis.

Though the exports’ contribution ratio rebounded to 92.3 percent in 2010 and 202.7 percent in 2011, it slid back to 121.7 percent in 2012 and 82.7 percent in 2013.

Economists, citing that the 45.5 percent ratio in 2014 stood at only 20 percent of the 2011 contribution, said export growth’s rapid slowdown is hampering the administration’s full-fledged effort to boost the economy.

Prospects involving external factors also remain gloomy. The Korea Institute of Finance stressed increased international competition for cheaper currencies by cutting benchmark interest rates.

“Though the Korean won has been in a relatively weak position against the U.S. dollar, it could gain value versus major currencies,” said KIF researcher Park Sung-wook in a report. He cited countries such as Japan, India, Turkey, Denmark and Switzerland for those pursuing low rates.

Park added that China could seek to depreciate its currency as its GDP growth slows. He also advised policymakers to continue to closely monitor the European Union’s quantitative easing.

A BOK official downplayed the sliding export-to-GDP contribution rate. He said the situation was somewhat attributable to the “improved domestic demand compared to the past several years,” apart from the weak export conditions from unfavorable external factors.

In February, exports of petrochemical products saw a 42.8 percent drop, followed by consumer electronics down 22.2 percent and automobiles down 17.8 percent. This may indicate that Samsung Electronics and Hyundai Motor have lost price competitiveness globally.

As the heavy drop in imports was due to low crude oil prices, which is estimated to have bottomed out in December 2014 and January 2015, analysts predict that Korea will see the current account surplus further reduce in the coming months as oil prices have bounced back since February.

By Kim Yon-se (kys@heraldcorp.com)