Korea's Current-Account Surplus Widens to One-Year High on Global Recovery
South Korea’s current-account surplus widened to a one-year high in June as the global recovery supported demand for the country’s cars and semiconductors.
The windfall was $5.04 billion, from a revised $3.82 billion in May, the Bank of Korea said in Seoul today. The current account is the broadest measure of international trade, tracking goods, services and investment income. The surplus was the biggest since June 2009.
South Korea’s economy grew 1.5 percent in the second quarter from three months earlier, beating estimates and adding to evidence that Asia is weathering global risks. Companies from Samsung Electronics Co. to Hynix Semiconductor Inc. reported record second-quarter earnings as a weaker won buoyed export competitiveness.
“The key is how well the economy can sustain its growth momentum amid uncertainties surrounding the global economy,” Kwon Young Sun, an economist at Nomura Holdings Inc. in Hong Kong, said before the release. Kwon expects the central bank to boost the benchmark interest rate 50 basis points to 2.75 percent by year-end as the country’s expansion adds to the case for higher borrowing costs.
The won fell 0.2 percent to close at 1,184.20 per dollar in Seoul, after strengthening 2.9 percent in the last six days, according to data compiled by Bloomberg. The benchmark Kospi index rose 0.3 percent to 1,773.47.
Robust Exports
July’s current-account surplus will be similar to June’s on robust exports, Lee Young Bog, a central bank official, told reporters today. The central bank this month forecast a surplus of $21 billion in 2010, compared with an April estimate of $10.5 billion and a record surplus of $42.7 billion last year.
Exports have boosted South Korea’s economic recovery and contagion from Europe’s debt woes has been “mild,” with gross domestic product growth likely to approach 6 percent this year, said Tom Byrne, a senior vice-president at Moody’s Investors Service. The outlook for the nation’s A1 government bond rating remains stable, the company said today.
Moody’s increased its rating for Asia’s fourth-largest economy from A2 in April. South Korea’s economic performance, continuing gains in governance and regulation, fiscal strength and “moderate” geopolitical risk from North Korea underpinned the ratings outlook, Moody’s said.
From a year earlier, South Korea’s economy grew 7.2 percent in the second quarter, slowing from an 8.1 percent jump in the first quarter that was the biggest gain since 2002, the Bank of Korea said this week in its latest GDP report.
Benchmark Rate
The central bank raised the benchmark rate on July 9 for the first time since the global crisis to 2.25 percent from a record-low 2 percent. Counterparts from Taiwan to Thailand, Malaysia and India have also boosted rates as price pressures outweigh concerns about the impact on exports of Europe’s fiscal woes, elevated U.S. unemployment and a slowdown in China.
Total exports on a customs-cleared basis, which excludes ships, surged 30.1 percent in June from a year earlier, compared with a revised 40.3 percent increase in May. Imports rose 38.2 percent.
The surplus on traded goods widened to $6.35 billion last month from a revised $4.17 billion in May, today’s report showed. The services deficit, which measures the flow of travel, transport costs and royalties, was $1.67 billion in June, compared with revised $643 million in May. The income account had a $327 million surplus last month, after a revised $298 million surplus in May.
To contact the reporters on this story: Eunkyung Seo in Seoul at eseo3@bloomberg.net; William Sim in Seoul at wsim2@bloomberg.net
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