[Edaily Reporter Lee Jeong-yoon ] Driven by a surge in both prices and volumes of semiconductor exports, South Korea’s current account surplus exceeded $46 billion in August. The cumulative surplus through August of this year approached $280 billion. The Bank of Korea forecast that the current account balance in September would improve further compared to August and projected that the annual current account surplus target of $450 billion for this year would be achievable.

◇ Semiconductor Prices and Volumes Rise in Tandem… Trade Balance in Goods Ranks ‘Second Highest on Record’

According to the “August Balance of Payments (Preliminary)” released by the Bank of Korea on the 8th, the current account surplus for August stood at $46.11 billion, an increase of $4.03 billion from the previous month ($42.08 billion). This marks the second-largest monthly surplus on record, following the all-time high of $49.73 billion in June, and marks the third consecutive month with a surplus in the $40 billion range.

The cumulative current account surplus from January through August this year reached $279.2 billion, approximately four times the figure for the same period last year ($69.67 billion). Looking at August alone, the surplus more than quadrupled, rising from $9.85 billion last year to $46.11 billion this year. Last August, the Bank of Korea significantly raised its forecast for this year’s annual current account surplus from $250 billion to $450 billion.

The merchandise trade balance was the primary driver of this massive current account surplus. The August merchandise trade balance posted a surplus of $46.81 billion, an increase of $6.38 billion from the previous month ($40.43 billion). This marks the second-largest surplus on record, following the all-time high of $47.89 billion recorded in June.

Exports totaled $104.8 billion, up from $100.45 billion the previous month, marking the third consecutive month they exceeded $100 billion. Compared to the same month last year, exports surged by 82.1%. Conversely, merchandise imports fell from $60.02 billion the previous month to $57.99 billion, contributing to the widening of the trade surplus.

Semiconductors are at the heart of the export growth. In August, exports of IT products rose 162.6% year-on-year. In particular, semiconductor exports surged 206.1%, marking an even higher growth rate than in July (176.3%). Exports of computer peripherals (SSDs) also increased by 366.8%.

Semiconductor prices and volumes are rising simultaneously. Yoo Seong-wook, Director of the Financial Statistics Division at the Bank of Korea’s Economic Statistics Bureau 1, said at a press briefing that day, “Semiconductor prices have risen by more than 100% compared to a year ago, and we estimate that volumes also increased by nearly 10% in August.”

Exports excluding semiconductors are also showing an upward trend. Director Yoo assessed, “Looking at customs-cleared exports from January through September, semiconductors increased by about 180% year-over-year, while other items also rose by about 18 percent,” adding, “While it is true that semiconductors are currently driving exports, the non-semiconductor sector is not doing too badly either.”

In fact, exports of non-IT items in August rose 8.1% compared to the same month last year. Petroleum products (64.9%), chemical products (14.1%), and steel products (13.4%) all saw increases. In contrast, passenger car exports fell by 30.1%. The Bank of Korea explained that this was due to a reduction in business days—as the summer vacation period, which fell in July last year, was moved to August this year—as well as the impact of partial strikes related to wage and collective bargaining negotiations.

The services balance posted a deficit of $1.68 billion, narrowing from the previous month’s deficit of $1.97 billion. The primary income balance—which reflects dividend and interest income earned from overseas assets—posted a surplus of $1.92 billion, narrowing from the previous month’s surplus of $4.35 billion.

◇“September to Exceed August”… Annual $450 Billion Surplus Within Reach

The Bank of Korea forecast that the current account surplus would continue in September, driven by strong exports. In particular, it left open the possibility that the September current account surplus could exceed August’s figure of $46.11 billion.

Deputy Director Yoo stated, “The trade balance in September recorded a large surplus that exceeded expectations, and in the fourth quarter, there is also an effect of exports being concentrated toward the end of the year,” adding, “I believe we will be able to achieve the level currently projected.”

To reach the annual forecast of $450 billion, an additional surplus of $170.8 billion is needed over the remaining four months from September through December. On a monthly average, this amounts to around $42.7 billion. Deputy Director Yoo explained, “If we maintain a monthly average of approximately $42.6 billion from September through December, we can meet the annual forecast, and I believe that is achievable.” He added, “Given that September’s customs-cleared exports were exceptionally high, I expect the current account balance for September to be even better than August’s.”

However, large-scale dividend payments in the fourth quarter and volatility in international oil prices are cited as potential variables. Deputy Director Yoo noted, “Large-scale dividends are scheduled based on corporate shareholder return policies; for companies with high foreign ownership, these dividends may be treated as payments under the primary income account, so this needs to be verified.” He added, “Increased oil price volatility due to the ongoing conflict in the Middle East also needs to be considered as a downside risk.”

In the financial account, overseas securities investments by domestic investors stood out. Overseas securities investments by domestic residents increased by $16.6 billion in August, marking the second-largest increase on record. Investments in foreign stocks rose by $10.15 billion, while investments in foreign bonds increased by $6.44 billion. The increase in overseas bond investments surpassed the previous record set in May of last year ($6.31 billion) to reach an all-time high. The Bank of Korea attributed this to the increased investment appeal of overseas bonds due to factors such as rising U.S. Treasury yields.

In contrast, foreign investment in domestic securities shifted from an increase of $8.17 billion the previous month to a decrease of $4.85 billion in August. Equity investments decreased by $470 million as the temporary boost from SK Hynix’s issuance of American Depositary Receipts (ADRs) in July faded. Bond investments also fell by $4.38 billion, partly due to a decline in the appeal of arbitrage trading.

Park Seong-gon, head of the Bank of Korea’s Balance of Payments Team, commented on foreign investment in domestic bonds, stating, “While it was strong in the first half of the year, it has been declining recently.” He added, “As the negative spread in arbitrage incentives continues to widen, we expect this trend to continue.”