South Korea's current account surplus hits second-highest level on record in July

South Korea's current account surplus reached its second-highest level on record in July, driven by strong exports in IT products, particularly semiconductors. For July specifically, it was the largest surplus ever recorded for the month.

The Bank of Korea said Friday that the current account posted a surplus of $42.08 billion in July, according to its preliminary balance of payments data. While smaller than the record $49.73 billion surplus logged the previous month, it ranked second-highest overall. The surplus has now exceeded $40 billion for two consecutive months.

"Both the current account and goods balances exceeded $40 billion for the second straight month, ranking second-highest on record," the Bank of Korea said. "Goods exports continued their strong performance, led by IT products including semiconductors, surpassing $100 billion for the second consecutive month."

The goods balance came in at $40.43 billion, also the second-highest on record. Exports totaled $100.45 billion — down from $112.37 billion in June due to a base effect from the concentration of shipments at the end of that quarter, but still the second-highest figure ever and the highest for any July. Imports also narrowed over the same period, falling from $64.48 billion to $60.02 billion.

Year-on-year, customs-basis IT exports surged 140.6% in July, led by computer peripherals (up 344.5%) and semiconductors (up 176.3%). Non-IT exports also rose 18.3%, driven by petroleum products (up 35.7%), chemical goods (up 19.1%) and steel products (up 11.3%).

On the imports side, capital goods rose 36.7% on a customs basis, led by semiconductor manufacturing equipment (up 60.1%), information and communications devices (up 31.6%) and semiconductors (up 56.7%). Raw materials climbed 29.1%, driven by crude oil (up 54.2%), gas (up 46.8%) and coal (up 36%). Consumer goods fell 3%, led by declines in durable goods (down 6.6%) and direct-purchase imports (down 4.3%), marking the first year-on-year drop in 15 months.

The services balance recorded a deficit of $1.97 billion in July, widening from a $1.29 billion deficit the previous month. The Bank of Korea said the deterioration came as the travel balance swung to a deficit, offsetting improvements in communications, computer and information services. The travel balance shifted from a $440 million surplus to a $340 million deficit, as the number of outbound travelers rose during the peak overseas travel season and following the designation of Constitution Day as a temporary public holiday.

The primary income balance expanded from a surplus of $3.27 billion to $4.35 billion, driven mainly by the dividend income balance of $3.83 billion. The dividend income surplus widened on higher direct investment dividend receipts, as chipmakers' overseas sales subsidiaries posted stronger operating profit.

In the financial account, net assets rose $40.32 billion in July. That was below the record increase of $46.71 billion posted the previous month but was still the second-largest gain on record.

By category, the direct investment increase widened from $3.38 billion to $4.13 billion. Residents' overseas investment rose $3.36 billion, while foreign investment in Korea fell $780 million.

In portfolio investment, residents' overseas investment jumped $13.57 billion — led by shares — nearly four times the $3.56 billion increase recorded the previous month. Foreign investment in domestic securities also rose $8.17 billion, primarily in shares, reversing a $26.32 billion outflow the prior month. The Bank of Korea attributed the turnaround to an easing of selling pressure on domestically listed shares, along with the issuance of SK hynix American depositary receipts.

Elsewhere, financial derivatives rose $5.03 billion. In other investment, assets increased $18.24 billion, mainly through loans, while liabilities fell $9.32 billion, primarily through repayments of borrowings. Reserve assets declined $1.8 billion.