S.Korea’s current account at near 7-year high on strong chip exports

South Korea reported its biggest monthly current account surplus in six years and nine months thanks to robust exports of semiconductors. But the growth is projected to slow in the second half due to an anticipated rise in imports.

Asia’s No. 4 economy reported a $12.26 billion current account surplus on a seasonally adjusted basis in June, the largest monthly gain since September 2017, with a profit of $12.34 billion, the Bank of Korea’s data showed on Wednesday.

The amount is nearly double from the $6.18 billion surplus in the same month last year.

The stellar result was driven by a jump in the goods account to an $11.47 billion surplus in June, the largest since September 2020, after extending the profit streak for a 15th straight month.  

For the first six months of the year, Korea’s current account surplus reached $37.73 billion, beating the Bank of Korea’s estimate of $27.9 billion. The central bank in May forecast the country’s current account for 2024 would reach $60 billion when combined with its $32.1 billion estimate for the second half.

STRONG EXPORTS BEHIND THE NEAR 7-YEAR HIGH SURPLUS

The central bank attributed the handsome goods surplus to brisk sales of Korean chips abroad, which helped elevate the country’s exports in June to $58.82 billion, up 8.7% from a year ago.

Over the same period, Korean chip exports soared 50.4% to $13.62 billion.

Meanwhile, the country’s imports fell 5.7% on-year to $47.35 billion.

But as imports of more semiconductor-making equipment and machinery, as well as airplanes, are planned for the second half, the country’s imports are expected to rebound, moderating surplus growth in goods and current accounts later this year, the central bank forecast.

The US dollar/won exchange rate stood at 1,379.02 in the late afternoon on Wednesday, up 1.70 from the previous day despite the country’s hearty current account surplus.

A surplus in the current account, the broadest measure of Korea's trade with the rest of the world, generally causes capital inflow, meaning a stronger Korean currency.

The Bank of Korea said the current dollar/won rate in the high 1,300s already factors in the country’s strong current surplus and expected it will prevent the won from weakening from its current level.

“The dollar/won rate will be affected more by external factors such as the Fed’s rate stance and the US presidential election,” said the Bank of Korea.

Korea’s outbound shipments to the US grew 14.8% on-year in June, while shipments to Southeast Asia leaped 27.9%.

PRIMARY INCOME ACCOUNT SURPLUS

June’s primary income account, which tracks wages of foreign workers and dividend payments overseas, posted a $2.69 billion surplus in June, widening from $1.76 billion in May after dividend payments to offshore investors had been completed.

The services account posted a $1.62 billion deficit, narrowed from a year ago when the deficit stood at $2.64 billion. But it was larger than May’s $1.29 deficit due to a bigger loss in the travel account, which hit $900 million.

The intellectual property rights deficit hit $457.2 million, reversing a $97.4 million profit a month ago and widening from a $409.8 billion deficit a year ago.

In the financial account, Koreans' overseas direct investment posted a $4.89 billion surplus in June, while foreigners’ investment in the country logged a $370 million deficit.

Koreans’ securities investment overseas rose by $6.63 billion on-month, while foreigners’ investment in Korean equities decreased by $2.39 billion over the same period.

Write to Jin-gyu Kang at josep@hankyung.com
Sookyung Seo edited this article.