South Korea's Current Account Surplus for 6 Consecutive Months... Limited Impact of Martial Law (Comprehensive)

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Thanks to strong exports of semiconductors and automobiles, South Korea's current account balance continued its surplus for six consecutive months. The Bank of Korea (BOK) expects that this year South Korea's current account will easily achieve the forecasted $90 billion surplus. The emergency martial law incident that occurred on the 3rd is currently assessed to have a limited impact on the country's current account balance.

According to the "October Balance of Payments (provisional)" released by the Bank of Korea on the 6th, South Korea's current account recorded a surplus of $9.78 billion in October. The current account posted a deficit for the first time in a year in April due to increased dividends paid to foreigners, but has maintained a surplus trend for six consecutive months since May.

The surplus amount ranked third highest ever for October. Last October, the current account surplus was $7.44 billion. The cumulative current account surplus from January to October was $74.24 billion, an increase of $50.06 billion compared to the same period last year ($24.18 billion).

The BOK analyzed that the improving trend in the current account continued into November, making it highly likely to achieve the annual forecasted surplus of $90 billion. Song Jae-chang, head of the BOK's Financial Statistics Department, said, "Exports have continued to show a favorable surplus trend in November, so achieving the annual forecast appears quite feasible."

Regarding the emergency martial law incident that started on the night of the 3rd and ended in the early morning of the 4th, its impact on the domestic current account is assessed as limited. Director Song explained, "Since the martial law was resolved early, it has not yet affected the fundamental flow of the current account. The current account is more influenced by external conditions, export market trends, and changes in U.S. economic policies."

Breaking down the October current account by category, the goods account surplus was $8.12 billion, a decrease from the previous month's $10.49 billion surplus. Exports reached $60.08 billion, up 4.0% year-on-year, while imports were $51.96 billion, down 0.7%. Based on customs clearance in October, semiconductor exports increased by 39.8% year-on-year, steel products by 6.8%, passenger cars by 5.2%, information and communication devices by 5.2%, and chemical products by 1.6%. Conversely, machinery and precision instruments (-4.2%) and petroleum products (-34.5%) decreased.

By region, exports increased year-on-year to China (10.8%), Southeast Asia (7.7%), the EU (5.7%), and the U.S. (3.4%), while exports to Japan decreased (-2.9%).

Imports totaled $51.96 billion, down 0.7% year-on-year. Raw material imports such as crude oil (-17.9%), petroleum products (-13.3%), coal (-9.5%), and chemical products (-6.7%) decreased by 4.7% compared to the same month last year. On the other hand, capital goods imports such as semiconductor manufacturing equipment (48.6%), semiconductors (18.2%), and precision instruments (3.3%) increased by 7.5%. Consumer goods imports, including precious metals and jewelry (72.9%) and direct consumer goods (15.1%), also rose by 8.8%.

The services account recorded a deficit of $1.73 billion, mainly due to processing services and other business services. The travel account deficit narrowed by $480 million due to increased travel income influenced by China's National Day holiday. Compared to the previous month (-$940 million), the deficit shrank. The transportation account turned to a deficit of $230 million due to a decline in container ship freight rates.

The primary income account showed a surplus of $3.45 billion, mainly from dividend income. The secondary income account recorded a deficit of $50 million.

The financial account, which shows capital inflows and outflows, saw a net asset increase of $12.98 billion in October. Direct investment decreased by $1.96 billion due to factors such as domestic large companies' overseas subsidiaries selling part of their shares.

Securities investment increased by $1.72 billion as stocks turned to net sales amid concerns over the performance slowdown of artificial intelligence (AI)-related stocks and caution ahead of the U.S. presidential election. This marked a significant reduction in the surplus compared to the previous month ($8.8 billion).

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