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Korea's exports to China continued their downward trend during the first three months of the year a victim of the fallout from the COVID-19 pandemic.
Although the downturn had a limited impact on the country's current account in February due to an increase in semiconductor exports and a rapid decline in outbound tourists, analysts warned that Korea will suffer a deficit starting in April, affected by the rapid spread of the coronavirus in the United States and Europe since late March.
According to the Bank of Korea (BOK), Tuesday, the current account registered a surplus of $6.41 billion in February, the largest since last October.
The central bank said the services account deficit narrowed to $1.45 billion from $1.54 billion a year earlier, as the decrease in the number of outbound tourists was far larger than that for inbound tourists after restrictions were imposed to combat COVID-19.
"COVID-19 affected the services account significantly, causing sharp declines in both outbound and inbound tourists," said Moon So-sang, head of the BOK's monetary and financial statistics division. "As the number of outbound tourists dropped more, however, the tourism account improved."
The goods account surplus widened to $6.58 billion from $5.42 billion, because of a turnaround in the chip industry and an increase in the number of days worked.
However, exports to China stood at $8.9 billion, down 6.7 percent from the same month last year.
"The impact of the coronavirus was significant in China in February, so exports to China dropped sharply," Moon said.
Earlier in April, data from the Ministry of Trade, Industry and Energy showed total exports dropped 0.2 percent in March year-on-year, while exports to China fell 5.8 percent.
According to analysts, this indicates the current account will worsen in the forthcoming months, reflecting the economic fallout from the pandemic.
Hanwha Investment & Securities analyst Kim Jin-myoung warned of significant shocks to exports in April.
"Despite the fast spread of COVID-19 in the U.S. and Europe in March, Korea's exports to those regions remained almost unchanged last month because of existing contracts," he said.
NH Investment & Securities analyst Kwon Ah-min also expects indicators to show that exports to the U.S. and Europe have been sluggish since late March, when confirmed cases began to rise sharply in those regions.
On top of exports, interim dividends that are supposed to be paid to foreign investors in April could deteriorate the country's current account. In April 2019, Korea suffered its first current account deficit in seven years, after $6.7 billion was paid in dividends to foreign shareholders.
