South Korea Feb Current Account Deficit Narrows

South Korea's current account deficit narrowed in February from the previous month as the goods account swung to surplus, central bank data showed on Friday.

Asia's fourth-largest economy reported a current account deficit of $1.5 billion last month, compared to a revised $2.19 billion gap in January, the biggest since February 1997, the Bank of Korea said in a statement.

South Korea's current account is expected to remain in the red, putting more pressure on the won currency, on higher commodity import prices and a slowdown in the U.S. economy, South Korea's No.2 export market, analysts said.

"Goods imports are rising really fast amid higher raw material prices while the service account is unlikely to improve. The current account is likely to post a deficit for the entire year," said Kim Jae-eun, an economist at Hana Daetoo Securities.

In February, a central bank official said it might need to downgrade its current account forecast for the whole of 2008, currently at a $3 billion deficit, if oil prices remained high.

The finance ministry said earlier this month it expected the current account deficit for 2008 to rise to $7 billion due to higher oil prices, its biggest gap since 1997 when the country was badly hit by the Asian financial crisis.

Last year South Korea recorded a $5.95 billion current account surplus.

The goods account turned to a surplus of $744 million in February from a revised $147 million deficit in January.

The service account deficit, which has in the past consistently eaten into the country's current account performance, was a seasonally adjusted $1.79 billion in February, up from a revised $1.6 billion deficit in January.

For the first two months of the year, the current account produced a seasonally adjusted deficit of $3.69 billion, compared to a $1.28 billion surplus for the same period in 2007, the Bank of Korea data showed.

The data also showed that South Korea's overseas borrowing rose by a net $5.53 billion in February after a revised $2.86 billion gain in January.

South Korea's policy makers have expressed concern over a rise in foreign currency loans as they push up the won and lift local money supplies. So the Bank of Korea imposed a ban on such lending in August Last year.

But the central bank eased the ban earlier this week and in January.