As Semiconductors Recover... Current Account Surplus for 7 Consecutive Months

$4.06 Billion Surplus in November
Increase in Passenger Cars and Chemical Products

In November last year, the current account recorded a surplus of $4.06 billion, continuing a surplus streak for seven consecutive months. The cumulative current account surplus from January surpassed that of the same period the previous year. The expansion of the goods trade surplus, driven by a recovery in semiconductor exports, had a positive impact.

According to the preliminary balance of payments statistics released by the Bank of Korea on the 9th, the current account recorded a surplus of $4.06 billion in November last year. The current account showed a surplus for seven consecutive months through November, following surpluses in May ($1.93 billion), June ($5.87 billion), July ($3.74 billion), August ($4.98 billion), September ($5.42 billion), and October ($6.8 billion).

The size of the current account surplus expanded for three consecutive months after July last year but decreased in November. Lee Dong-won, head of the Bank of Korea’s Financial Statistics Department, explained, "Although the goods trade surplus expanded due to strong exports of semiconductors and passenger cars, the current account surplus in November decreased as deficits in the services account and primary income account widened."

The cumulative current account surplus from January to November last year was preliminarily estimated at $27.43 billion, an increase of about $280 million compared to the same period in 2022 ($27.15 billion).

By category, the goods account showed a surplus of $7.01 billion, maintaining a surplus since April last year. The surplus also increased compared to the previous month ($5.35 billion). Exports amounted to $56.45 billion, increasing by 7.0% year-on-year in November, following October.

Exports had increased in October last year for the first time in 14 months. In November, exports increased and imports decreased, similar to October, shedding the stigma of a "recession-type surplus."

Container unloading operations at Busan Port's Sinsundae Pier and Gammam Pier [Image source=Yonhap News]

Looking at customs-cleared exports in November last year, by item, passenger cars increased by 22.9%, semiconductors by 10.8%, and chemical products by 2.6% compared to the same month the previous year, while petroleum products (-4.5%) and steel products (-8.2%) decreased, resulting in an overall increase. By region, exports to the United States rose by 24.7%, Southeast Asia by 11.7%, Japan by 11.4%, and the European Union (EU) by 3.6%, while exports to China decreased by 0.2%.

Lee said, "Exports increased for two consecutive months due to the recovery in the semiconductor market and easing of export sluggishness to China," adding, "In particular, semiconductor exports increased by 10.8%, showing the largest rise since July 2022, and the export improvement trend continues recently." He also added, "China exports had an average growth rate of -24.1% from January to September last year but improved to -0.2%, indicating a mitigation of the slump."

There were also remarks that this year’s exports depend on the semiconductor market. Bae Min-geun, a researcher at LG Economic Research Institute, said, "Exports are recovering, but they should actually be rising faster and more in line with the growing economy, but that is not happening. Automobiles and ships are doing well, but we need to watch how much semiconductors will recover."

Imports amounted to $49.45 billion, down 8% year-on-year. The Bank of Korea explained that the decline in raw material imports (-13.2%) continued due to falling energy prices, and the decrease in capital goods (-11.7%) and consumer goods (-6.2%) also widened. In particular, the decline in international oil and natural gas prices expanded the decrease in imports.

Kim Jung-sik, emeritus professor of economics at Yonsei University, explained, "As exports gradually increase and oil prices fall, the current account surplus is expanding," adding, "This year’s current account surplus depends on trends in international oil prices and changes in income accounts related to stock market movements."

On the morning of the 9th, the 2023 November Balance of Payments (provisional) briefing was held at the Bank of Korea in Jung-gu, Seoul. From the left in the photo: Park Seong-gon, Deputy Head of the International Balance of Payments Team at the Bank of Korea; Lee Dong-won, Head of the Financial Statistics Department at the Bank of Korea; Moon Hye-jung, Head of the International Balance of Payments Team at the Bank of Korea; Ahn Yong-bi, Manager of the International Balance of Payments Team at the Bank of Korea. (Photo by Bank of Korea)

The services account recorded a deficit of $2.13 billion, centered on travel, other business services, and processing services. The deficit widened compared to the previous month (-$1.25 billion).

The travel account (-$1.28 billion) saw a doubling of the deficit as travel income decreased due to fewer tourists from Southeast Asia and China, while travel payments increased due to a rise in outbound travelers. Meanwhile, the intellectual property rights account turned to a surplus ($240 million) as domestic companies’ income from patent royalties received from overseas subsidiaries increased.

The primary income account turned to a deficit of $150 million as dividend income decreased while quarterly dividend payments increased significantly. The secondary income account recorded a deficit of $660 million.

The financial account net assets (assets minus liabilities) increased by $2.02 billion in November last year, significantly narrowing the increase compared to the previous month ($8.37 billion).

In direct investment, net assets increased by $3.36 billion as domestic investors’ overseas investments rose by $4.71 billion, mainly in the secondary battery sector, and foreign investors’ domestic investments increased by $1.36 billion.

In securities investment, net assets decreased by $2.21 billion as domestic investors’ overseas investments increased by $3.99 billion, while foreign investors’ domestic investments rose by $6.19 billion due to expectations of semiconductor industry improvement and easing concerns over prolonged global high interest rates.

This content was produced with the assistance of AI translation services.