BofA On Changing Nature Of Korea's Current Account

"77% of Korea's current account (C/A) surplus came from the primary income account in 2022. This is a staggering figure vs 10% historical trend. Against the backdrop of export downcycle and jump in commodity imports, the goods balance fell to a 30-year low of 50% within C/A balance. Meanwhile, the rise in return flow of the overseas dividend and portfolio income has boosted the primary income surplus to a record high of 77%. We believe a compositional shift is at play in the C/A balance structure as Korea increases overseas investments. We highlight signs of Japanification in the C/A balance, where primary income surplus is likely to keep increasing from here, leaving Korea with a primary income account dilemma in maintaining its currency competitiveness."