South Korea's Current Account Turns to Deficit of $2.45 Billion

By William Sim

Aug. 29 (Bloomberg) -- South Korea's current-account balance turned to a deficit in July as a weaker currency and higher oil prices boosted the nation's import bill.

The shortfall was $2.45 billion last month following June's surplus of $1.82 billion, the Bank of Korea said in Seoul today. The current account is the broadest measure of trade, tracking goods, services and investment income.

Rising commodity prices and the won's decline to a four- year low are making imports more expensive and fanning the fastest inflation in a decade, squeezing household incomes and corporate profits. The economy expanded at the slowest pace in more than a year last quarter as consumers cut spending.

Exports to China and other emerging markets are driving South Korea's economic growth as local demand weakens.

Prior to June's surplus, South Korea recorded current- account deficits in each of the six months to May, the longest run of shortfalls since the 1997 Asian financial crisis.

To contact the reporter on this story: William Sim in Seoul at wsim2@bloomberg.net