In June, the current account posted a surplus close to $14.3 billion, continuing a surplus streak for 26 months. This is the third longest surplus record since the 2000s. The export surge of information and communication technology (IT) items such as semiconductors and computer peripherals contributed to the record third-highest goods surplus. The increase in primary income through dividends also played a role.
The current account is a statistic that aggregates the exports and imports of goods and services between countries, along with all economic transactions involving capital and labor. It is a key indicator of a country's fundamental strength, consisting largely of goods, services, primary income, and transfers.
According to the 'balance of payments (preliminary)' released by the Bank of Korea on the 7th, the surplus of the current account in June this year was recorded at $14.27 billion, marking an all-time high. The duration of the surplus is also unprecedented, reaching 26 consecutive months, the third longest since the 2000s after the periods of 83 months from May 2012 to March 2019 and 27 months from May 2020 to July 2022.
The goods balance (exports minus imports) led the overall surplus. The goods surplus in June was recorded at $13.16 billion, ranking third monthly in history. The first and second were $14.52 billion in September 2017 and $13.32 billion in March 2016, respectively. Compared to the previous month ($10.66 billion), it increased by $2.5 billion and was $1.03 billion more than a year ago ($12.13 billion).
Exports surged led by IT items, contributing to the goods surplus. June exports were recorded at $60.37 billion, a 2.3% increase compared to the same month last year. This marks a rebound after a 2.9% decline in May. The exports of semiconductors and computer peripherals (based on customs clearance) increased by 11.3% and 13.6%, respectively, while non-IT items such as pharmaceuticals surged by 51.8%.
Regionally, exports increased to the European Union (EU, +14.7%), Southeast Asia (6.0%), and Japan (+2.9%). The increase to the EU was more than three times that of the previous month (3.9%), and Japan turned to increase. The increase to Southeast Asia was smaller than the previous month (8.2%). Exports to the United States (-0.5%) and China (-2.7%) continued to decline, but the drop was smaller than that of the previous month (both -8.2%).
Imports recorded $47.21 billion, a 0.7% increase compared to a year ago. Although raw materials (-6.4%) decreased, imports of capital goods (+14.8%) and consumer goods (+7.6%) increased, reversing the trend after three months. By item, imports of semiconductor manufacturing equipment (+38.8%), semiconductors (+22.7%), and transportation equipment (+8.2%) increased, while petroleum products (-33.1%), coal (-25.9%), and crude oil (-15.2%) decreased.
The services balance, which encompasses transactions related to travel, transportation, and intellectual property royalties, recorded a deficit of $2.53 billion. The deficit widened compared to the previous month (-$2.28 billion), primarily due to an increase in deficits in travel and other business services.
The primary income balance, reflecting the flows of wages, dividends, and interest, showed a surplus of $4.16 billion. This marked a significant increase compared to the previous month (+$2.15 billion). The rise in dividend income, combined with a base effect from reduced dividend payments in the previous month, contributed to the widening surplus.
The transfer income balance recorded a deficit of $530 million. The deficit expanded by $140 million compared to the previous month (-$390 million) and by $150 million compared to a year ago (-$280 million). The transfer income balance represents the differences between grants and remittances made without compensation between residents and non-residents.
The net worth of the financial account, which indicates capital inflows and outflows, increased by $17.29 billion. This is more than double the increase from the previous month (+$6.71 billion). Direct investment increased by $3.18 billion. Outward direct investment from residents increased by $3.92 billion, while inward foreign direct investment increased by $740 million. Portfolio investment rose by $4.44 billion, with outward investment from residents increasing by $9.84 billion and inward investment from foreigners rising by $5.41 billion.