According to the Bank of Korea on the 5th, the cumulative current account surplus between January and May is expected to reach $25.47 billion, exceeding the original forecast of $27.9 billion in the first half of the year. The outlook for this year's surplus is also expected to rise from $60 billion.
Recently, the Ministry of Strategy and Finance predicted that this year's current account surplus will be $63 billion, a significant increase from the original January forecast ($50 billion). This is due to the increase in the goods balance surplus, which is the main axis of the current account, from $55 billion to $72 billion and the export growth rate from 8.5% to 9%.
The government's export target of $700 billion this year has also been hit with a "green light." The Ministry of Trade, Industry and Energy expects annual exports to increase by more than 10% in a year to reach an all-time high of $700 billion.
The actual strength of export recovery is getting stronger. Exports in May rose 11.1 percent year-on-year on the back of strong sales in semiconductors (53 percent), information and communication devices (18 percent) and passenger cars (5.3 percent). By region, exports increased evenly in Southeast Asia (30.4 percent), the U.S. (15.6 percent), and China (7.6 percent).
Ha Joon-kyung, a professor of economics at Hanyang University, said, "Automobiles and semiconductors exported to the U.S. will improve and the current account surplus will be significant for the time being."
However, it is a variable that corporate export profitability is deteriorating due to the "super yen," logistics instability, and prolonged high interest rates amid growing export influence and increased economic dependence on the goods balance. If an unexpected bad trade occurs, chances are high that it will face headwinds. Analysts say that a preemptive response to securing competitiveness of export companies is necessary.
The proportion of commodity balance in the total current account increased to the largest since the pandemic in 2020. It is analyzed that it will sink to 60.5% in 2022, when the economic shock intensified, and then hit 114.3% this year after showing 96.1% last year.
"Korea's dependence on trade is the second highest in the world," said Kim Dae-jong, a professor of business administration at Sejong University. "If geopolitical instability or a slowdown in global trade becomes visible, it will inevitably be hit hard." Semiconductor and automobile exports continued to be good, but the cosmetics and retail industries are feared to remain sluggish in the second half of the year, said Kim Sang-bong, an economics professor at Hansung University.
Kim Chang-beom, a full-time vice president of the Korea Business Association, stressed, "We need to establish financial and industrial countermeasures in preparation for the possibility of prolonged yen."
Another task to overcome is that the travel deficit is becoming chronic as sluggish domestic demand is holding back the economy this year. It is pointed out that in order to improve the current account stably, prescriptions to revitalize tourism and domestic demand have become urgent.
The travel account in May was $860 million, continuing the deficit for 114 months. This is the aftermath of people leaving the country one after another due to high domestic travel prices and the low yen.
Professor Kim Dae-jong pointed out, "It has become important to establish a strategy to attract foreign tourists and expand domestic tourism and consumption by utilizing the charm of K-pop and K-food."
In fact, the effect of linking travel and leisure with the front and rear industries is significant. According to the Korea Economic Association, production inducement per won of leisure activities reached 1.76 won, which is more effective than mobile phones (1.48 won), TVs (1.57 won) and computers (1.71 won), which are the main products of the domestic manufacturing industry. Ban Ki-sik, head of the National Institute for Management Strategy, said, "The side economic effect of the vacation is high," adding, "It is necessary to implement systematic revitalization measures because it can be expected to boost the productivity of workers along with boosting consumption."
[Reporter Kim Jeonghwan / Reporter Han Sangheon]
