Semiconductors Lead, Smartphones Push... Current Account Surplus for Four Consecutive Months (Comprehensive)

August Current Account Surplus of $6.6 Billion, Surplus Continues for 4 Consecutive Months
Surplus Margin Decreases Compared to Previous Month, Increases Year-on-Year
Exports of Semiconductors and Mobile Phones Drive Surplus

With the continued strong export performance of IT items such as semiconductors and mobile phones, South Korea's current account balance has recorded a surplus for four consecutive months. Due to improvements in IT exports, the current account surplus trend is expected to continue for the remainder of this year.

According to the "August Balance of Payments (Provisional)" released by the Bank of Korea on the 8th, South Korea's current account surplus in August reached $6.6 billion. The current account has maintained a surplus for four consecutive months since May.

Although the surplus amount decreased compared to $8.97 billion last month, it expanded compared to August last year ($5.41 billion). The cumulative current account surplus from the beginning of this year through August was $53.6 billion, an increase of $42.93 billion compared to the same period last year ($10.67 billion).

Breaking down the August current account by category, exports amounted to $57.45 billion, up 7.1% year-on-year, while imports increased by 4.9% to $50.86 billion. As a result, the goods balance recorded a surplus of $6.59 billion. The goods balance surplus has continued for 17 consecutive months since April last year.

The sustained export strength is attributed to IT items such as semiconductors. In August, customs-based exports of information and communication devices increased by 44%, semiconductors by 38.3%, and petroleum products by 0.6% compared to the previous year.

Song Jae-chang, Director of the Financial Statistics Department at the Bank of Korea's Economic Statistics Bureau, stated, "Due to increased investment related to artificial intelligence (AI), the strong export performance of IT items including semiconductors continues. Although some express concerns about a peak-out in the semiconductor market, customs-based semiconductor exports set a new record last month, so we expect the export improvement trend to continue for the time being."

With the continued strong export performance of IT items, the Bank of Korea expects the current account surplus trend to persist for the remainder of this year. Director Song emphasized, "Thanks to the solid export growth of IT items, the current account surplus trend will continue. The initially forecasted second-half current account surplus of $35.3 billion will be comfortably achieved." He added, "Expectations for a soft landing of the U.S. economy, sustained AI-related demand, and China's economic stimulus measures are positive factors, while the intensification of Middle East conflicts is a downside risk."

On the morning of the 8th, the 2024 August Balance of Payments (provisional) briefing was held at the Bank of Korea in Jung-gu, Seoul. From the left in the photo: Kim Tae-ho, Manager of the International Balance of Payments Team at the Bank of Korea; Song Jae-chang, Head of the Financial Statistics Department at the Bank of Korea; Moon Hye-jung, Head of the International Balance of Payments Team at the Bank of Korea; Lee Young-woo, Manager of the International Balance of Payments Team at the Bank of Korea. (Photo by Bank of Korea)

Exports of non-IT items decreased in August. Exports of steel products (-0.2%), machinery and precision instruments (-1.6%), passenger cars (-3.6%), and chemical products (-4.4%) all declined. By region, exports to the European Union (EU) increased by 16.1%, Southeast Asia by 15.3%, the United States by 11.1%, China by 7.9%, and Japan by 6.6%.

The services balance recorded a deficit of $1.23 billion, mainly due to travel and processing services. The deficit in the travel balance widened due to the peak overseas travel season in summer. The transport balance surplus increased compared to the previous month due to rising container ship freight rates.

The primary income balance showed a surplus of $1.69 billion, mainly from dividend income. The secondary income balance recorded a deficit of $460 million.

The financial account, which shows capital inflows and outflows, increased net assets by $4.93 billion in August. The increase was smaller compared to the previous month ($11.03 billion). Direct investment saw an increase of $4.46 billion in outbound investment by domestic investors and $1.21 billion in inbound investment by foreigners.

Securities investment showed an increase of $8.64 billion in outbound investment by domestic investors, mainly in stocks. Foreigners' domestic investment increased by $2.62 billion, mainly in bonds.