S. Korea suffers largest current account deficit in nearly decade in April

South Korea suffered the largest current account deficit in almost a decade in April due mainly to a sharp decline in exports caused by the coronavirus pandemic, central bank data showed Thursday.

The country posted a current account deficit of US$3.12 billion in the month, marking a turnaround from a $5.96 billion surplus the month before, according to preliminary data from the Bank of Korea (BOK).

The reading marks the largest current account deficit since January 2011.

The deficit also came one year after the country posted its first current account deficit in 84 months in April 2019, due mostly to what the BOK had then called an unusually high seasonal increase in dividend payments.

This year the deficit was largely attributed to the country’s first trade deficit in 99 months.

“(The current account deficit) is largely attributed to exports falling at a faster rate than imports, with the economic impact from the COVID-19 pandemic coming into full swing,” Moon So-sang, head of the BOK’s monetary and financial statistics division, told a press briefing.

The country’s exports plunged 24.3 percent on-year to $36.9 billion in April, while imports dropped 15.9 percent to $37.8 billion, leaving a $950 million trade deficit for Asia’s fourth-largest economy.

The BOK said the country’s goods account surplus came to $820 million in April, a sharp decline from a $6.66 billion surplus the previous month and a $5.61 billion surplus in April 2019.

The BOK official predicted the country’s current account balance will likely turn to the black in May, noting the country’s trade balance has made such a turnaround in the month.

“Fortunately, the trade balance in May has been tallied at a $430 million surplus. Therefore, we are looking somewhat positively that the current account balance too will post a surplus,” Moon said.

In April, the service account deficit slightly expanded to $1.42 billion from $1.39 billion a month before.

It also marks a slight expansion from a $1.27 billion deficit in April 2019.

The country’s tourism account deficit narrowed to $340 million from $370 million in March and $440 million a year earlier.

Its tourism income sharply declined to $360 million from $2.1 billion a year earlier and $740 million in March as the number of visitors to the country plunged 98.2 percent on-year to some 29,000 amid the new coronavirus pandemic.

The number of South Koreans going overseas tumbled 98.6 percent to about 31,000. Their overseas spending narrowed to $710 million from $1.11 billion a month before and $2.54 billion in April 2019.

The primary income account posted a $2.29 billion deficit, marking a sharp turnaround from a $930 million surplus the previous month.

It narrowed from a year earlier when the country posted a $4.18 billion deficit in its primary income account.

Its dividend payment account deficit narrowed to $3.01 billion in the month from a $4.87 billion deficit a year before, but it marked a turnaround from a $40 million surplus in March.