Input 2021.02.05 11:44
Considering the possibility of oil price rising to the 5 billion dollar level and recovery of overseas travel in the second half
With the current account surplus of $75 billion last year, which exceeded expectations, expectations for this year’s current account are also growing. Such expectations are also fueled by the return of exports in the fourth quarter to an increase from the previous year. In particular, there are many voices for the prospect of another supercycle for semiconductors.
However, it is expected that this year’s current account will not exceed expectations as much as last year. It is highly likely that imports will increase due to rising international oil prices, and if vaccination is expanded, the travel account deficit could increase again due to the resumption of overseas travel. The BOK, announcing its economic outlook on the 25th, predicts that this year’s current account will not exceed $70 billion.
Last year, the current account surplus recorded more than expected in the aftermath of the novel coronavirus infection (Corona 19). The total amount was $75.28 billion, exceeding the BOK’s estimate of $65 billion in November by more than $10 billion. Compared to the year before the US-China trade conflict ($59.68 billion), it also increased by $15.6 billion.
Park Yang-su, head of the Economic Statistics Bureau of the Bank of Korea, said, “The reduction in overseas travel and the decline in oil prices were the main factors in recording a surplus in the current account surplus than expected in the Corona 19 crisis.” It was competitive.”
In fact, exports last year overcame the aftermath of Corona 19 faster than expected. Annual exports declined for the second consecutive year to 5166 billion dollars, but from September it turned to an increase from the same month last year. It was shown that the exports of information and communication devices and semiconductors through customs clearance increased by 13.0% and 5.4%, respectively, compared to a year ago, leading to recovery.
The service account deficit was $16.190 billion, a decrease of $10.6 billion from a year ago. The travel account deficit was $5.63 billion, which was only half of the previous year ($1,187 billion). In Korea, where the number of outbound travelers exceeded the number of inbound travelers, the travel balance improved due to travel restrictions caused by Corona 19.
The main income balance ($1.25 billion), which represents the inflow and outflow of wages, dividends, interest, etc., ranked second in history following 2019, and the financial account ($77.12 billion) representing capital outflows has been in 3 years. It was also found that the largest increase in the current account contributed to the strong current account surplus.
The BOK predicts that this year’s current account surplus will not be as strong as last year. Last November’s economic outlook predicted that last year and this year’s current account surplus was $65 billion and $60 billion, respectively, but it is difficult to close the gap that exceeded last year’s forecast.
Above all, the rise in international oil prices is cited as the biggest reason. Last year, the average annual Dubai oil price fell 33.4% year-on-year to only $42.29, resulting in a sharper decline in imports than exports. However, last month, Dubai oil rose to the mid-dollar level, showing an uptrend. In Korea, where imports of raw materials are large, when imports increase, the commodity balance, which accounts for the largest share of the current account, inevitably decreases.
The recovery of travel demand is also a factor that will reduce the current account surplus this year. Last year, the service balance ($16.69 billion) improved to the minimum since 2915 ($1.63 billion), but it is highly likely that this trend will not continue this year. If vaccination begins this month, the BOK expects that overseas travel will be possible in the second half of the year.
An official from the BOK said, “Because of the effect of rising oil prices this year, the scale of the surplus will not exceed $70 billion like last year,” he said. “It will depend on whether or not the vaccine is commercialized, but the movement will become more active in the second half of this year.”