Finance counsels

South Korea posted a current-account surplus for the first time in seven months as exports gained.

The surplus was $1.82 billion in June, compared with a deficit of $377.5 million in May, the Bank of Korea said in Seoul today. The current account is the broadest measure of trade, tracking goods, services and investment income.

Demand from emerging markets and oil-rich nations is driving South Korea's economic growth as domestic consumption wanes. The economy expanded at the same pace in the second quarter as the previous three months as increased exports of ship and electronics made up for weaker household spending.

“Exports, especially ships, played a big role in June's surplus,'' said Lee Sang Jae, an economist at Hyundai Securities Co. in Seoul. “The outlook for the current account looks brighter as oil prices are declining.''

The won gained 0.3 percent to 1,006.35 versus the dollar at 10:30 a.m. in Seoul after the report was released. South Korea's currency has fallen 7.4 percent in 2008.

Record oil prices and a weaker won increased the cost of imported goods and saw South Korea post a current-account deficit each month between December 2007 and May this year. That was the nation's longest run of shortfalls since the 1997 Asian financial crisis.

Higher commodity prices have driven the inflation rate to a 10-year high, which has squeezed household incomes. The economy grew 0.8 percent in the second quarter from the previous three months as exports rose and consumer spending cooled, a July 25 report showed fast cash online.

Exports Increase

A surge in ship exports swelled South Korea's international trade surplus on a free-on-board basis to $3.48 billion in June, from $612.5 million in May, today's report showed.

Total exports on a customs-cleared basis, which doesn't include ships, increased 16.6 percent in June from a year earlier, while imports rose 32.4 percent.

South Korea may post another surplus in July because prices for oil and other commodity are declining, Yang Jae Ryong, a central bank statistics official, told reporters in Seoul today.

Crude oil traded at $123.23 a barrel after-hours in New York, near a seven-week low. Prices fell 4.8 percent last week.

The government this month forecast a trade surplus of $3.8 billion in the second half of 2008, led by growth in exports to China and emerging markets. South Korea posted a trade deficit of $5.7 billion in the first six months of this year.

The shortfall on the services account, which measures the international flow of travel, transport costs and royalties, widened to $2.13 billion in June from $1.17 billion in May.

South Korea's income account, which tracks the flow of interest payments, investment income and wages, posted a surplus of $827.2 million in June.

Source

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