South Korea Posts Record July Current-Account Surplus of $42.08 Billion on Chip Exports

South Korea posted its largest-ever current-account surplus for the month of July as robust exports led by semiconductors continued.

Preliminary balance-of-payments data released by the Bank of Korea on Sept. 4 showed a current-account surplus of $42.08 billion in July. The surplus narrowed from the previous month but was the second-largest monthly total on record.

The cumulative surplus for the year also expanded rapidly. The January-July surplus reached $233.09 billion, up sharply from $59.82 billion a year earlier. That means South Korea has already exceeded half of the BOK’s recently raised full-year current-account surplus forecast of $45 billion.

Trade in goods drove the increase. The goods account posted a $40.43 billion surplus in July. Exports rose 65.3% from a year earlier to $100.45 billion, while imports increased 21.7%.

By category, semiconductors and information-technology exports led the gains. On a customs-clearance basis, exports of computer peripherals including SSDs surged 344.5% from a year earlier, while semiconductor exports jumped 176.3%. Petroleum products and chemical products rose 35.7% and 19.1%, respectively.

On the import side, capital goods tied to facility investment posted the biggest gains. Imports of capital goods increased 36.7%, led by semiconductor manufacturing equipment, semiconductors and transport equipment. Imports of raw materials including crude oil, gas and nonferrous metals rose 29.1%. Consumer-goods imports, however, fell 3.0% as passenger cars and durable goods declined, turning negative for the first time in 15 months.

The services account remained in deficit. It recorded a $1.97 billion shortfall in July, while the travel account swung to a $340 million deficit from a surplus a month earlier. Increased demand for overseas travel during the summer vacation season likely contributed.

The primary-income account improved on higher dividend income. Its surplus widened to $4.35 billion in July from the previous month, including a $3.83 billion surplus in dividend income. Improved earnings at overseas affiliates of South Korean semiconductor companies were cited as the backdrop.

In the financial account, net assets increased by $40.32 billion. Overseas securities investment by South Korean residents rose by $13.57 billion, while foreign investment in domestic securities increased by $8.17 billion. Foreign investment in South Korean stocks rose by $5.98 billion.