Korea stepping up efforts to recycle abroad large current account surplus

Korea's current account surplus narrowed in April to USD8.1bn (March: USD10.4bn; Feb: USD6.4bn). The smaller surplus came despite a larger goods surplus of USD12.6bn, as the income balance swung to an outflow of USD2.8bn (March: +USD0.5bn) on the large number of scheduled dividend payments abroad. Nonetheless, given the cumulative surplus of USD31.5bn for the first four months of 2015, the current account surplus is expected to reach USD94.3bn in 2015 (BoK: USD96bn; 2014: USD89.2bn) and USD84.4bn in 2016 (BoK: USD82bn), says Barclays.


However, with exports continuing to come in soft and the potential marginal benefit of any further rate cuts diminishing, the emphasis is likely to be on other growth levers - such as fiscal stimulus (supplementary budget) and an engineering of a weaker KRW to support growth. To push out capital, the government is likely to encourage state entities to recycle the current account surplus abroad by stepping up overseas loans and investments, or by stockpiling essential minerals and fuels, accodring to Barclays.