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(LEAD) Current account surplus likely to narrow amid energy costs, slowing demand: minister

Finance 09:09 September 05, 2022

(ATTN: UPDATES with more details throughout)

SEOUL, Sept. 5 (Yonhap) -- South Korea's finance minister said Monday the country's current account surplus could narrow as the trade balance will likely deteriorate amid a hike in energy prices and slowing global demand.

Finance Minister Choo Kyung-ho also said the government will take stern actions against foreign exchange market-disturbing behaviors during the extended Chuseok fall harvest holiday amid the won's sharp weakness against the U.S. dollar.

The minister made the remark at the start of an emergency meeting on the economy with the central bank chief and financial regulators to discuss ways to enhance policy coordination in the midst of heightened external economic uncertainty.

"There is a possibility that the country's current account surplus could narrow as the trade balance would deteriorate amid a hike in energy prices and slowing demand from China and others," Choo said.

He said as the current account balance will likely show volatility for the time being, the government will closely monitor cross-border capital flows.

This photo taken Sept. 1, 2022, shows stacks of containers at a port in South Korea's southeastern city of Busan. (Yonhap)

The Korean currency slid to the 1,360 level against the U.S. dollar for the first time in more than 13 years Friday amid the Federal Reserve's aggressive monetary tightening and a widening trade deficit. The won has slid more than 12 percent per dollar so far this year.

The nation posted a trade deficit of US$9.47 billion last month, the largest amount to date. It logged a trade deficit for the fifth straight month in August for the first time in nearly 14 years due to high energy costs.

South Korea posted a current account surplus of $24.8 billion in the first half, smaller than a surplus of $41.8 billion a year ago, according to central bank data.

The current account is the broadest measure of trade, service and investment flows into and out of the country.

Last month, the Bank of Korea revised down its 2022 forecast of the current account surplus to $37 billion from its May estimate of $50 billion.

Choo said the latest volatility in the financial market has been mainly driven by global economic situations, not by problems from South Korea's external soundness.

"The won has sharply weakened against the dollar since August, affected by a widening trade deficit and the Chinese yuan's weakness," he said.

The minister said authorities will jointly monitor global financial markets and economic situations during the four-day Chuseok holiday that starts Friday.

"We will take stern actions against market-disturbing behavior in a timely manner," Choo said.

This photo, taken Sept. 5, 2022, shows Finance Minister Choo Kyung-ho (C) posing for a photo with Lee Bok-hyun (L), chief of the Financial Supervisory Service; Bank of Korea Gov. Rhee Chang-yong (2nd from L); Kim Joo-hyun (2nd from R), chair of the Financial Services Commission; and Choi Sang-mok (R), senior presidential secretary for economic affairs, ahead of their meeting on the economy. (Yonhap)


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