Current Account Balance in October 2008 and Future Outlook

Nov 27, 2008

Source : Ministry of Strategy and Finance

I. Causes of shift towards current account surplus in October

(1) The current account balance in October recorded a surplus of 4.91 billion dollars. It is the first surplus recorded since June this year(+1.82 billion dollars) and the highest monthly shift ever recorded due to the following reasons:

i) Travel account balance shifted to surplus
ii) Current transfers account balance shifted to surplus iii) Income account balance surplus rising substantially

(unit: 100 million dollars)	2007				2008
(unit: 100 million dollars)	Aug	Sep	Oct	Jan - Oct	Aug	Sep	Oct	Jan - Oct
?Current Account	5.7	23.0	24.6	52.6	¡â47.0	¡â13.5	49.1	¡â90.1
- Goods	29.1	37.3	36.4	263.2	¡â28.0	¡â8.9	27.9	38.1
- Service	¡â24.5	¡â17.5	¡â14.2	¡â178.8	¡â20.0	¡â12.4	¡â0.5	¡â150.9
(travel)	¡â15.9	¡â12.1	¡â11.8	¡â128.1	¡â10.9	¡â3.9	5.0	¡â82.6
- Income	4.4	6.9	5.0	¡â0.7	3.2	7.9	14.1	38.1
- Current Transfer	¡â3.3	¡â3.6	¡â2.6	¡â31.2	¡â2.2	¡â0.2	7.7	¡â15.5

(2) Travel account balance (+0.5 billion dollars) that had chronically recorded a deficit in the past shifted to a surplus for the first time since April ¡¯01 (+30 million dollars)

? Domestic departures decreased greatly in October (¡â13.5%) due to the rising exchange rate and the economy downturn, while foreign arrivals increased slightly (0.7%), prompting a comparably large shift towards a surplus for general travel account (0.71 billion dollars)

* Currency Rate (won/dollar)	(08.1Q)956		(2Q)1017		(3Q)1063			(10)1327		(11.1~26)1379
* Departures (unit: 10000)	(07.8)131	(9)102		(10)108		¡æ	(08.8)116		(9)82		(10)93
* Arrivals (unit: 10000)	(07.8) 58	(9) 56		(10) 64		¡æ	(08.8) 58		(9)59		(10)65

? Overseas studying and training were reduced by 0.21 billion dollars y-o-y, correspondingly increasing service account balance by 0.16 billion dollars

(3) The current transfers account balance shifting to a surplus for the first time since August 2004 (+10 million dollars) contributed towards increased current account surplus

? Wire transfers to Korea by Koreans living overseas increased by a large margin while transfers from Korea decreased greatly due to the rising exchange rates

* Transfer inwards (unit: 100 million)	: (07.10)5.6 ¡æ (08.10)12.8
* Transfer outwards (unit: 100 million)	: (07.10)6.9 ¡æ (08.10)3.4

(4) The income account surplus rose substantially with rising interest income

* Interest income (unit: 100 million)

: (07.8)13.8 (9)14.2 (10)15.9 ¡æ (08.8)10.7 (9)13.7 (10)16.7

? Interest income rose substantially following foreign denomination bonds, dividends account balance also recorded a surplus (+0.2 billion dollars)

2. November outlook

November current account balance is expected show a surplus of around one billion dollars. However, if current transfers account continues to show a large surplus in November, there is a possibility that current account balance surplus will be increased likewise

As the drop in oil prices around the world has not been reflected in crude oil price, the positive effect of oil price on current account balance is expected to continue for a while

* October crude oil price (per barrel)	: $91
* Dubai oil price (per barrel)	: (October average) $68, 11.26) $44

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