S. Korea current account dips alongside fall in petchem exports

29 December 2009 09:57  [Source: ICIS news]

SINGAPORE (ICIS news)--South Korea posted a lower current account (CA) surplus in November from the previous month as a result of a drop in petrochemical exports, analysts said on Tuesday.

The drop in the CA was due to the fall in petrochemical export volumes within the same period as exports to China decreased, said Lee Sung-Kwong, an economist with brokerage house Shinhan Investment Corporation in Seoul.

The Bank of Korea, the country's central bank, said on Tuesday that the CA surplus in November narrowed slightly to $4.28b (€2.99b) from $4.76b a month earlier.

CA measures an economy’s foreign exchange-related trade and services transactions with the rest of the world.

South Korean export volumes are closely interlinked with demand from China, Lee said, adding that a fall in Chinese imports of petrochemicals would "definitely impact numbers".

The current account surplus could be attributed to a bump in petrochemical exports in 2009 but it could grow thinner next year as exports to China slows down, according to analysts.

"The Chinese economy is decreasing its overall capacity in some manufacturing sectors,” said Lee.

Yi Eeu Soo, an analyst at brokerage house Samsung Securities, said Asia could face a supply surplus of petrochemicals next year as major players in China start up their plants, resulting in a decline in exports from South Korea.

“A lot of these plants are already ramping up production or have already ramped it up,” Yi said.

Lee said petrochemical exports shrank 19.1% in the January to November period this year but said that the numbers may still turn positive next year.

“We expect petrochemical exports to grow around 9.5% overall next year. In a best case scenario it might grow over 10%,” he said.

Lee also projects that the South Korean economy could grow by 16.4% next year, with petrochemicals among the major growth sectors alongside semiconductors, ship building, automobile and information technology segments.

($1 = €0.70)

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By: Nurluqman Suratman

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