Korea continues to register a large current account surplus despite a prolonged export slump. Data released by the Bank of Korea shows the nation’s current account posted the largest-ever monthly surplus of $12.17 billion in June, extending the surplus streak to a record 52 months.

The June figure boosted the aggregate surplus for the first half of the year to $50 billion, surpassing the central bank’s forecast of $48 billion. The bank expects the surplus to reach $95 billion by the end of the year, about $10 billion less than $105.8 billion in 2015.

Normally, a surplus on a nation’s current account is seen in a positive light, as it suggests its economy is in good health.

Yet Korea’s continued current account surplus is cause for serious concern as it is not the result of brisk export growth. The surplus is called a “recession-type” surplus as it is created amid a continued drop in both exports and imports, with imports falling more sharply than exports.

Korea’s exports have continued to fall since January 2015. Last month, outbound shipments dropped 10.2 percent from the same month a year ago.

Imports have kept shrinking at a faster pace amid a weakening recovery momentum of the Korean economy. In July, imports fell 14.4 percent.

A persistent current account surplus amid shrinking exports is not desirable, as it could set in motion a vicious circle. When a nation registers excessive surpluses on its current account, it is bound to face pressures for currency appreciation from its trading partners. If its currency value rises as a result, it will suffer an erosion in its export competitiveness, which will cause a further drop in its exports.

In April, the U.S. Treasury Department put Korea on its monitoring list for foreign exchange policies, along with China, Japan, Germany and Taiwan.

The department’s action was triggered by Korea’s large trade surplus against the U.S. and persistent current account surplus.

Korea was not designated as a currency manipulator, but it faces pressure from Washington to appreciate its currency to rectify the imbalances.

Korea is also under pressure from the International Monetary Fund. In its recently released External Sector Report for 2016, the fund categorized Korea as a country whose current account is “substantially stronger” than implied by its fundamentals. 

The report advises Korea to reduce its surplus by expanding domestic demand through increased fiscal spending. It notes that Korea has room to ease its “stronger-than-desirable” fiscal stance.

For Korea, easing fiscal policy is needed not only to address external imbalances but to reduce its negative output gap, the difference between actual output and what the economy could produce at full capacity.

In fact, the Korean government is moving in this direction. It is pushing to stimulate domestic demand with a 28 trillion-won (about $25.3 billion) spending package, including an 11 trillion-won extra budget.

Yet it remains to be seen whether the package would go far enough in tackling the imbalances.

While seeking to expand fiscal spending, the government needs to arrest the free fall in exports. Last month, the Ministry of Trade, Industry and Energy came up with a set of measures aimed at promoting exports.

Yet those measures were mostly short-term in nature. The government needs to draw up plans to reframe the nation’s industrial structure away from sectors that have lost competitiveness toward new high-growth industries.