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Services account surplus expected this year due to K-pop

The growing influence of K-pop coupled with the huge success of Psy's "Gangnam Style" seems to have helped push Korea's services account into the black.

Korea's services account, which shows the difference between a nation's total exports and imports of services, has almost always been in the red for as long as anyone can remember, but this year is expected to be different. Increases in overseas construction orders, a growing number of inbound foreign tourists, and larger K-pop exports due to the Korean wave have brought a turnaround in the country's services account, which is expected to turn a surplus for the first time in 14 years since 1997.

According to the Bank of Korea, the country's services account recorded a surplus of USD 2.3 billion in the first nine months of this year. This is a huge contrast compared to a USD 4.5 billion deficit in the same period last year.

Minister of Culture, Sports and Tourism Choe Kwang-shik (fourth from left) meets with Li Tingting from China (fifth from left), the ten millionth visitor to Korea this year, in a ceremony at Incheon International Airport on November 21 to mark the number of inbound foreign tourists surpassing ten million (photo: Yonhap News).Minister of Culture, Sports and Tourism Choe Kwang-shik (fourth from left) meets with Li Tingting from China (fifth from left), the ten millionth visitor to Korea this year, in a ceremony at Incheon International Airport on November 21 to mark the number of inbound foreign tourists surpassing ten million (photo: Yonhap News).

"The main topic of this year's Trade Day on December 5 will be service exports," said Korea's Minister of Strategy and Finance Bahk Jae-wan recently. "Service exports are expected to surpass USD 100 billion for the year."

According to the central bank, service exports reached USD 81.9 billion in the first nine months of this year, an increase of 19.7 percent from USD 68.4 billion in the same period last year.

According to the central bank, the individual, culture, and entertainment account, which is a part of the services account, posted a USD 37.3 million surplus in the first nine months of this year. In the same period last year, it recorded USD 218.5 million in deficit. This reflects the balance of amounts received and paid for music, film, television, and gaming materials.

Korea has recorded hundreds of millions of dollars in deficit in the individual, culture, and entertainment account every year. In 2007, it posted a deficit of 480 million. However, things have started changing this year. The same account posted a USD 900,000 surplus in the first quarter of 2012 and a USD 38 million surplus in the second quarter, although it went back to a deficit of USD 1.6 million in the third quarter. 

Computer rendering of a USD 6.4 million urban project in Hanoi, Vietnam, by Posco Engineering and Construction. The builder said in July 2011 that the Vietnamese government gave a final approval of the master plan for the project (photo: Yonhap News).Computer rendering of a USD 6.4 million urban project in Hanoi, Vietnam, by Posco Engineering and Construction. The builder said in July 2011 that the Vietnamese government gave a final approval of the master plan for the project (photo: Yonhap News).

"The popularity of 'Gangnam Style' contributed to an improvement in Korea's services account," said Kim Pil-soo, a researcher at Hyundai Research Institute. "The number of inbound foreign tourists reaching ten million so far this year also contributed to increases in entertainment- and culture-related spending and to the improvement in the account balance."

A larger part of the improvement, however, comes from increased overseas construction orders and rises in the number of inbound foreign tourists. The construction service account surplus recorded USD 12.6 billion in the first nine months of this year, even bigger than the USD 8.1 billion surplus for the whole of last year. The travel account posted a 4.1 billion deficit in the same period but it is a 36 percent decline from the USD 6.4 billion deficit in the identical period last year.

By Limb Jae-un
Korea.net Staff Writer
jun2@korea.kr

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