May Current Account Surplus of $8.9 Billion, Largest Since September 2021
Exports Increase and Imports Decrease Result in Goods Balance Surplus of $8.75 Billion
Semiconductor Export Growth Rate Reaches 53%, Driving Large Surplus
June Current Account Also Expected to Show Large Surplus
On the morning of the 5th, the May 2024 Balance of Payments (provisional) briefing was held at the Bank of Korea in Jung-gu, Seoul. From the left in the photo: Lee Young-woo, Manager of the Balance of Payments Team; Song Jae-chang, Head of the Financial Statistics Department; Moon Hye-jung, Head of the Balance of Payments Team; Ahn Yong-bi, Manager of the Balance of Payments Team. (Photo by Bank of Korea)
With continued strong semiconductor exports, the current account balance in May recorded the largest surplus in 2 years and 8 months. As the export improvement trend continues, a large surplus is also expected for the current account balance in June.
According to the 'May Balance of Payments (provisional)' released by the Bank of Korea on the 5th, the current account balance in May was recorded at a surplus of $8.92 billion. This is the largest surplus in 2 years and 8 months since September 2021 ($9.51 billion).
The current account balance had recorded a surplus for 11 consecutive months since May last year, temporarily turning into a deficit in April this year due to large dividend payments to foreigners, but returned to a surplus after one month.
Semiconductor export growth rate reaches 53%, driving large surplus
The large surplus in the current account was driven by exports of our main items such as semiconductors and information and communication devices. Exports in May ($58.95 billion) increased for eight consecutive months due to growth in semiconductors, information and communication devices, petroleum products, and passenger cars. Based on customs clearance, semiconductors increased by 53% compared to the same month last year, information and communication devices by 18%, petroleum products by 8.2%, passenger cars by 5.3%, and machinery and precision instruments by 5.3%. On the other hand, chemical products (-1.9%) and steel products (-10.9%) decreased.
The Bank of Korea had forecasted the current account surplus for the first half of the year at $27.9 billion, but having already achieved $25.47 billion by May this year, the current account surplus for the first half of the year is expected to exceed $30 billion.
Song Jae-chang, head of the Financial Statistics Department at the Bank of Korea's Economic Statistics Bureau, explained, "Exports have greatly improved centered on semiconductors, leading to eight consecutive months of export growth." He added, "Thanks to this, the current account surplus exceeded previous expectations." He further stated, "The customs-based goods balance for June, compiled so far, increased compared to May," and forecasted, "The current account will continue to show a large surplus in June as well."
Export containers are being loaded onto a ship at Busan North Port. Photo by Jinhyung Kang aymsdream@
Looking at the regions, exports increased compared to the same month last year in Southeast Asia (30.4%), the United States (15.6%), China (7.6%), and Japan (2.4%), but decreased in the European Union (EU, -2.2%).
Imports in May were $50.2 billion, down 1.9% compared to the same month last year. Raw materials, capital goods, and consumer goods all turned to a decrease. Based on customs clearance, raw materials such as petroleum products and gas decreased by 1% compared to the same month last year, capital goods such as semiconductors and information and communication devices decreased by 3.3%, and consumer goods such as home appliances and direct consumer goods decreased by 2.1%.
Mr. Song said, "Imports have significantly decreased mainly in non-energy items such as semiconductors and passenger cars, leading to an overall decline in imports."
With exports increasing and imports decreasing, the goods balance, which represents the difference between the two, showed a surplus of $8.75 billion, marking 14 consecutive months of surplus. The size of the goods balance surplus is also the largest in 2 years and 8 months since September 2021.
Service balance remains in deficit due to travel deficit
In May, the service balance recorded a deficit of $1.29 billion, mainly due to travel and processing services. Construction ($290 million) continued to show a surplus, but travel (-$860 million) and processing services (-$550 million) continued to be in deficit. The intellectual property rights balance turned to a surplus of $100 million as income from patent and trademark royalties increased.
The primary income balance turned to a surplus of $1.76 billion, mainly due to dividend income. This was because the impact of large dividend payments to foreign investors in the previous month was resolved. Salaries and wages decreased by $190 million, while investment income increased by $1.95 billion.
The financial account net assets, which indicate capital inflows and outflows, increased by $7.58 billion in May, turning to an increase after one month. Direct investment increased by $5.53 billion. Overseas investment by domestic investors increased by $6.33 billion, the largest increase in 25 months since April 2022. Foreign investment in Korea increased by $790 million.
Mr. Song stated, "Investment in sectors that led overseas direct investment such as automobiles and secondary batteries decreased in April but increased again in May, causing overseas investment by domestic investors to increase to the largest scale in 25 months."
Securities investment in May increased by $4.78 billion. Overseas investment by domestic investors increased by $7.1 billion, mainly in stocks, while foreign investment in Korea increased by $2.32 billion, mainly in bonds. Reserve assets decreased by $2.2 billion.
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