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

Cargo ships anchored at Busan Port (Yonhap)
Cargo ships anchored at Busan Port (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 US 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.

The Korean currency slid to the 1,360 level against the US 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 $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. (Yonhap)

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