Korea’s finance minister said on Monday that the country’s current account surplus could narrow as the trade balance is likely to deteriorate amid rising energy prices and slowing global demand.
Finance Minister Choo Kyung-ho also said the government would take tough action against disruptive behavior in the foreign exchange market during the extended Chuseok autumn harvest holiday amid the won’s sharp weakness against the 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 improve policy coordination amid heightened external economic uncertainty. .
“The country’s current account surplus may shrink as the trade balance deteriorates amid rising energy prices and slowing demand from China and others. “, said Choo.
He said that as the current account balance is likely to show volatility for the time being, the government will closely monitor cross-border capital flows.
The Korean currency slipped to the 1,360 level against the dollar for the first time in more than 13 years on Friday amid aggressive monetary tightening by the Federal Reserve and a growing trade deficit. The won has fallen more than 12% against the dollar so far this year.
The country posted a trade deficit of $9.47 billion last month, the highest amount to date. It posted a trade deficit for the fifth consecutive month in August for the first time in nearly 14 years due to high energy costs.
Korea posted a current account surplus of $24.8 billion in the first half of the year, down from a surplus of $41.8 billion a year ago, central bank data showed.
The current account is the broadest measure of trade, services, and investment flows to and from the country.
Last month, the Bank of Korea revised down its current account surplus forecast for 2022 to $37 billion from its May estimate of $50 billion.
Choo said the latest volatility in the financial market was mainly due to the global economic situation, not issues with Korea’s external strength.
“The won has weakened sharply against the dollar since August, hurt by a growing trade deficit and the weakness of the Chinese yuan,” he said.
The minister said authorities will jointly monitor global financial markets and the economic situation during the four-day Chuseok vacation that begins Friday.
“We will take strong action against disruptive market behavior in a timely manner,” Choo said.