South Korean Current-Account Surplus Narrows in July

By Seonjin Cha and Seyoon Kim

Aug. 28 (Bloomberg) -- South Korea posted a current-account surplus for a sixth month in July, helped by an increase in overseas shipments as the global economic slowdown eased.

The surplus was $4.4 billion last month compared with $5.43 billion in June, the Bank of Korea said in Seoul today. The current account is the broadest measure of trade, tracking the international flow of goods, services and investment income.

“South Korea is likely to maintain a current-account surplus through the end of the year, helped by a gradual improvement in exports,” said Lee Sung Kwon, an economist at Good Morning Shinhan Securities Co. in Seoul. “Imports may rise next year after local demand picks up.”

The economy expanded 2.3 percent in the second quarter from the previous three months, the most since the fourth quarter of 2003. The Bank of Korea forecast on July 10 that the nation will post a current-account surplus of $29 billion this year, more than the $18 billion estimated in April. The surplus may shrink to $7 billion in 2010, the bank said.

The trade goods surplus was $6.17 billion in July compared with $6.61 billion in June, today’s report showed. Exports on a customs-cleared basis fell to $32.02 billion from a revised $32.61 billion in June.

August Forecast

The current account will remain in surplus for the time being, Lee Young Bog, a Bank of Korea statistics official, told reporters in Seoul. Still, it will probably shrink “significantly” this month from July as the bank expects the goods trade surplus to narrow sharply and the deficit from the service account to widen, Lee said.

The won rose 0.4 percent against the U.S. currency to 1,243.60 per dollar as of 9:02 a.m. in Seoul versus 1,248.75 the previous trading day, according to Seoul Money Brokerage Services Ltd. The Kospi stock index gained 1 percent to 1,614.53.

The services deficit, which measures the international flow of travel, transport costs and royalties, was $1.89 billion in July, from a $1.45 billion shortfall in June.

The capital account, a measure of total inflows and outflows of international investment, recorded a surplus of $2.38 billion in July, the report showed. South Korea posted a record $7.94 billion surplus in the portfolio investment account, as foreign investors boosted purchases of shares due to the country’s relatively faster economic recovery compared with other nations in the region, Lee of the Bank of Korea said.

To contact the reporter on this story: Seonjin Cha in Seoul at scha2@bloomberg.netSeyoon Kim in Seoul at skim7@bloomberg.net