SOUTH KOREA
- Korea’s current account surplus rose to $12.37bn in December, from $10.04bn in November.
- Whereas historically a current account surplus was a point of pride at the export driven success of an economy, in the current environment it draws the attention from an American President armed with tariffs, especially when 18.7% of its exports went to the US in 2024, highest in non-Japan Asia.
- In 2023, exports to the US accounted for 6% of Korean GDP making the Korean economy one of the most exposed to the President's desire to bring back made in America.
- Whilst the relationship between the US and Korea has always been strong, the current political upheaval presents risks that the relationship may not be getting the focus it requires.
South Korea current account US$mn
Source: MNI - Market News/Refinitiv
- One of the main contributors is the rise in primary income to $4.7bn, from $2.4bn, and investment income rising to $4.8bn from $2.5bn.
- Exports rose to $52.8bn from $47.1 bn to be up 4.6% y/y, whilst imports were up to $52.8bn from $47.1bn (+2.4% y/y) delivering a good merchandise trade surplus of $10.43bn, from $9.88bn in November.
- Services remain in deficit at $2.11bn, up from $1.95bn in November.
- Within the details of the financial account – portfolio investment, there was a significant drop in portfolio investment liabilities.
- This can be attributed to foreigners owning Korean assets which since early 2024 have been declining. The primary driver of this has been foreign ownership of Samsung driven by real concerns as to Samsung’s ability to keep up with the competitive landscape in Artificial Intelligence and not helped by the political uncertainty at present.
South Korea balance of payments financial acoount - portfolio investment US$mn 6-mth ma
Source: MNI - Market News/Refinitiv
- Asset levels remain strong as the National Pension Service is an active purchaser of offshore assets and whose investment activities are well regarded. It is likely to provide backing to a new government policy being discussed to provide support to the Won.
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