In June, the current account recorded a surplus of nearly $14.3 billion, setting a new all-time high. This was primarily due to a significant expansion of the goods account surplus, driven by strong semiconductor exports. The Bank of Korea expects the current account to maintain a favorable trend in the second half of the year, even with the full effect of U.S. tariffs, as the demand for semiconductors related to artificial intelligence (AI) is expected to remain robust.
◇ Current account surplus of $14.27 billion in June… 26 consecutive months of surplus
According to the 'balance of payments (preliminary)' released by the Bank of Korea on the 7th, the surplus of the current account for June this year was tallied at $14.27 billion, marking the largest surplus ever recorded. This is the third longest streak of surplus since May 2012 to March 2019 (83 months) and from May 2020 to July 2022 (27 months), with a consecutive surplus lasting 26 months.
The goods account (exports minus imports), which accounts for the largest share of the current account, led the surplus. The goods account surplus was recorded at $13.16 billion, marking the third highest on a monthly basis. The highest was in September 2017 ($14.52 billion surplus), followed by March 2016 ($13.32 billion).
In June, exports amounted to $60.37 billion, a 2.3% increase from the same month last year, driven by semiconductor (+11.3%) and computer peripherals (+13.6%) exports. Exports increased in regions like the European Union (+14.7%) and Southeast Asia (+6.0%), as well as Japan (+2.9%), while exports to the United States and China decreased by 0.5% and 2.7%, respectively. Imports were $47.21 billion, up 0.7% from a year earlier.
The primary income account, reflecting the flows of wages, dividends, and interest, showed a surplus of $4.16 billion, contributing to the current account surplus. The surplus widened significantly compared to the previous month (+$2.15 billion). In contrast, the services account, which encompasses transactions related to travel, transportation, and intellectual property rights, recorded a deficit of $2.53 billion, which was larger than the previous month's deficit of $2.28 billion.
Director General Shin Seung-cheol of the Bank of Korea noted regarding the June current account, "Exports showed a strong performance, centered on semiconductors." He explained that semiconductor exports were positively impacted by preemptive demand effects due to U.S. tariffs and robust demand for high-spec semiconductors such as the new DDR5 and high-bandwidth memory (HBM).
◇ "Strong semiconductor exports and dividend income will continue… favorable current account surplus to persist"
The Bank of Korea projected that even with the high tariffs being imposed by the U.S., the current account would show a favorable trend mainly driven by semiconductor exports. Director General Shin stated, "The current account is expected to show a considerable surplus in July," adding, "While the U.S. tariff policy will have negative impacts, the robust performance of semiconductor exports and dividend income will help maintain the current account at a healthy level in the second half of the year."
Earlier, U.S. President Donald Trump announced on the 31st of last month (local time) that a 15% reciprocal tariff would be imposed on Korean products and, on the 6th, a 100% tariff on semiconductors imported from around the world. This has led to predictions that Korea, highly dependent on semiconductor exports, may face inevitable adverse effects. However, the Bank of Korea refuted these observations, stating that semiconductor demand remains strong.
Director General Shin explained, "Even if item tariffs on semiconductors and pharmaceuticals are determined in the future, our semiconductors' competitiveness will not diminish in the U.S.-Korea negotiations due to the most favored nation treatment, and I believe the expanding demand related to artificial intelligence (AI) will prolong the current semiconductor market expansion phase compared to before."
However, it was mentioned that the impact of tariffs on automobile exports could become significant from the second half of the year. Director General Shin stated, "Automobile exports are experiencing a base effect due to last year's boom," adding, "Moreover, since a tariff is set to be imposed on automobiles in the U.S., the effect on exports to the U.S. is expected to become evident in the future." He concluded, "Domestic corporations are pushing for expanded local production and diversification of exports, so the outcomes should be watched closely in the future."