April 26, 2024

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[THE INVESTOR] South Korea’s chronic deficit in its services account hit a new high in the first quarter, as Chinese tourists shunned visiting the country in the wake of Beijing’s apparent retaliation against the deployment of a US anti-missile system on the Korean Peninsula, the central bank said on May 4.

According to the Bank of Korea, Asia’s fourth-largest economy saw its current account surplus halve to $5.9 billion in March from $10.5 billion a year earlier, mainly due to a widened deficit in its services account and a smaller surplus in the goods account.

 

The deficit in the services account grew to $3.32 billion in March, more than three times bigger than the $920 million deficit a year earlier. More than one-third of the deficit came from the $1.4 billion deficit in the travel account, which increased twofold in March from a year earlier.

These factors led to the first-quarter deficit in the services account, hitting a record quarterly high of $8.9 billion.

The travel account’s deficit also worsened as Chinese authorities in March banned group tourists from visiting South Korea in retaliation against the deployment of the US’ Terminal High Altitude Area Defense system in Seongju, North Gyeongsang Province.

The number of Chinese tourists in Korea plummeted by 40 percent on-year to 360,000 in March, according to the BOK. A rise in the number of Koreans traveling overseas also contributed to the deficit in the travel account.

“If the number of Chinese tourists does not return to the previous level, Korea’s travel account will continue to post a deficit,” said Chung Kyu-il, director of BOK’s economic statistics department.

Although tourists from Japan and Southeast Asia increased, this could not offset the fast falling number of Chinese tourists, he added,

“As the number of Koreans traveling overseas keeps rising, the travel account will depend more on the number of foreign travelers visiting Korea.”

The sagging shipping industry also contributed to the widened services deficit, the BOK said.

Meanwhile, the current account surplus of $5.9 billion in March was a 61 month consecutive surplus.

The surplus in the goods account was reduced to $9.8 billion in March from $12.8 billion a year earlier, due to a greater increase in imports than exports.

Imports surged 28 percent on-year to $42.6 billion in the same month, with raw materials such as oil and gas imports going up 40 percent. Exports increased 13.6 percent on-year to 48.8 billion in March, led by oil products and semiconductors, the BOK said.

By Kim Yoon-mi/The Korea Herald (yoonmi@heraldcorp.com)