The current account surplus shrank to 2.26 billion dollars in August from a 3.61 billion dollar surplus a month ago. It was the lowest surplus figure this year.

The central bank of Korea (BOK) attributed the drop to falling exports and rising interests on external debts. Exports have contracted since May under the strain of Asia's economic crisis.

``A steady fall in exports has been eroding the country's current account surplus,'' Chung Jung-ho, a BOK official said.

But he said South Korea could achieve a year-end current account target of 37 billion dollars this year against a deficit of 8.2 billion last year.

Seoul said yesterday that the economy will begin to recover in the second half of 1999, when it said the country will achieve zero growth after contracting by six per cent this year.

Economists havehowever, said they believe the recession will continue through next year -- when they said the economy will shrink by around two per cent -- and possibly into 2000.

The current account surplus in the first eight months to August widened to 27.52 billion dollars, reversing a deficit of 11.62 billion dollar a year earlier.