May Current Account Surplus Led by Semiconductors Hits Largest in 2 Years 8 Months... June Looks Even Better

Strong Semiconductor Exports Drive Large Current Account Surplus
Positive Trend Expected to Continue from First Half into Second Half

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. There are also expectations that the current account balance will maintain a positive trend from the first half into the second half of the year as export growth continues.

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, but temporarily turned to a deficit in April due to large dividend payments to foreigners, before returning to a surplus after one month.

The large surplus in the current account balance was driven by exports of our key items such as semiconductors and information and communication devices. Exports in May ($58.95 billion) increased for the eighth consecutive month, led by semiconductors, information and communication devices, petroleum products, and passenger cars. Based on customs clearance data, 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 a current account surplus of $27.9 billion for the first half of the year, but having already achieved $25.47 billion by May, the current account surplus for the first half of this 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, resulting in eight consecutive months of export growth," adding, "Thanks to this, the current account surplus exceeded previous expectations."

The current account surplus is expected to continue in June as well. Mr. Song emphasized, "The current account balance in June is expected to record a substantial surplus mainly in the goods balance and primary income balance," and added, "According to the Ministry of Trade, Industry and Energy's customs clearance-based trade balance for June, the goods balance increased by about $3 billion compared to May, which is likely to be reflected in the June current account balance."

There is also a possibility that the annual current account balance for this year will increase beyond initial expectations. Mr. Song stated, "The first half's performance exceeding forecasts could be a factor for upward revision of the annual forecast," but added, "For the second half, we need to consider overall forecast figures such as global economic growth rate, global trade growth rate, and international oil prices, so please refer to the economic outlook in August."

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 data, 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%.

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.