Korea continued to record a current account surplus for the 20th consecutive month, thanks to improved balances in goods and services in September, the Bank of Korea reported Tuesday.

However, it remains uncertain how long Asia’s fourth-largest economy will maintain its record led by brisk exports as the value of local currency is projected to rise to a level that appropriately reflects Korea’s economic fundamentals, analysts said.

Korean exports, which account for about 60 percent of the country’s growth, depend on a weak won against the three major currencies, including the U.S. dollar, to remain competitive compared with its rivals such as Japan and China.

The won further gained by 0.5 won to 1,060.6 won to the dollar on Tuesday as foreign capital continued to flow into the Korean market, boosting the benchmark KOSPI to close at 2,051.76, up 0.18 percent.

Korea had a current account surplus of $6.57 billion in September, remaining in the black for 20 straight months.

Balances in goods driven by exports improved in September from a month earlier. The services surplus widened due to increased inbound tourism and royalty receipts for intellectual property.

The cumulative surplus reached $48.79 billion in January-September this year, nearly double that of the same period last year.

The BOK forecast the country’s total annual surplus to hit $63 billion, accounting for more than 5 percent of its gross domestic product this year.

However, this positive outlook could be weighed down by the impending monetary stimulus cuts in the U.S., analysts said.

“We expect the (Korean) central bank to assess the effects of past stimulus and prepare the economy for an eventual Fed exit from quantitative easing,” Barclays said in a report.

“In our view, it is likely to begin normalizing interest rates in the third quarter of 2014, when the output gap is expected to close and domestic demand should have strengthened sufficiently.”


By Park Hyong-ki
(hkp@heraldcorp.com)