S. Korea`s current account deficit hits record high in August

SEOUL, Sept. 30 (Yonhap) -- South Korea's current account deficit reached a
record high in August as the goods balance posted the largest shortfall in 12
years, the central bank said Tuesday.

The current account shortfall reached US$4.71 billion in August, up from a
revised $2.53 billion deficit the previous month, the Bank of Korea (BOK) said in
a report.
In the January-August period, the country logged a cumulative deficit of $12.6
billion, compared with a surplus of $498.2 million a year earlier.
The country had posted shortfalls for the sixth straight month since December,
marking the longest red-ink streak since the 1997 Asian financial crisis. The
current account is the broadest measure of trade, service and investment flows
into and out of the country.
The BOK predicted the country is likely to post another deficit in September,
although the size of the shortfall would be smaller than that in August.
"But in the fourth quarter, the country's current account is likely to remain in
the black due to the effect of falling oil prices and robust exports," Yang
Jae-ryong, head of the central bank's balance of payments statistics team, told a
press conference. "South Korea is expected to log an annual current account
deficit of about $10 billion."
A widening shortfall of the current account, coupled with rising overseas debt
and a selling spree of local stocks by foreign investors, is putting downward
pressure on the already-weakening local currency.
"The largest deficit of the current account will exert further downward pressure
on the won," said Kim Jae-eun, an economist at Hana Daetoo Securities Co. "I
think by the first half of next year, concerns about the country's current
account deficit will likely persist amid a global credit crunch."
The South Korean currency tumbled against the U.S. dollar Tuesday, spooked by the
U.S. Congress' rejection of an emergency rescue plan. The local currency was
trading at 1,223.45 won versus the greenback as of 9:43 a.m., sharply down 34.65
won from Monday's close. The won has declined more than 23 percent against the
U.S. dollar so far this year.
The goods balance posted a deficit of $2.82 billion in August, a turnaround from
a revised $217.6 million surplus the previous month. The August deficit was the
largest since August 1996 when the shortfall amounted to $3.59 billion.
Customs-cleared exports grew 18.7 percent year-on-year to $36.8 billion last
month and imports expanded 37 percent to $40.6 billion, according to the central
bank.
The price of Dubai crude, South Korea's benchmark, jumped 67.6 percent in August,
compared with a year earlier. South Korea, the world's fifth-largest crude buyer,
relies entirely on imports for its oil needs.
The shortfall of the service account, which includes South Korean spending on
overseas trips, narrowed to $2 billion in August, compared with $2.46 billion a
month earlier.
The capital account, which tracks cross-border investments, recorded a net inflow
of $5.33 billion in August, compared with a net outflow of $5.77 billion a month
earlier, mainly because foreign investors eased their selling spree. The July
figure marked the largest net outflow since December 1997 when the county saw a
net outflow of $6.37 billion.
In early July, the central bank revised upward its forecast of the annual current
account shortfall to $9 billion, from its initial prediction of $3 billion, the
first deficit since 1997.
But the BOK said that the size of the expected annual shortfall is not that
worrisome as it makes up less than 1 percent of the economy.