21 Months of Current Account Surplus, $2.94 Billion in January... Scale Reduced Due to Early Year Effect (Comprehensive)

In January, the current account balance recorded a surplus of $2.94 billion, marking 21 consecutive months of surplus. However, compared to December last year, which posted the third-largest surplus on record, the amount shrank to about one-quarter. This was influenced by the removal of year-end effects, seasonal factors such as a reduced trade balance based on customs clearance at the beginning of the year, and fewer working days due to the Lunar New Year holiday. The start is considered smooth for achieving this year's current account surplus forecast of $75 billion, which is set lower than last year.

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According to the 'January 2025 Balance of Payments (Provisional)' released by the Bank of Korea on the 7th, South Korea's current account surplus in January was $2.94 billion, marking 21 consecutive months of surplus since May 2023. Although the scale significantly decreased compared to the previous month's $12.37 billion, it was only slightly lower than the $3.05 billion recorded in the same month last year. Song Jae-chang, head of the Financial Statistics Department at the Bank of Korea's Economic Statistics Division 1, explained, "Due to the base effect at the beginning of the year caused by concentrated exports at the end of the year, the trade balance based on customs clearance shrank, and the surplus narrowed further due to fewer working days caused by the long Lunar New Year holiday."

As a result, the surplus in the goods account, which holds a large portion of the current account, significantly decreased. In January, the goods account surplus was only $2.5 billion, down from $10.43 billion in the previous month and $4.36 billion in the same month last year.

Exports amounted to $49.81 billion, down 9.1% compared to the same month last year. Goods exports turned negative for the first time in 15 months since October 2023. While some IT items such as semiconductors and computers continued to increase, the decline in non-IT items like petroleum products and passenger cars was significant, leading to a sharp overall decrease. Petroleum product exports in January, based on customs clearance, were only $3.42 billion, a steep 29.2% drop compared to the same month last year. Passenger car exports also fell 19.2% to $4.83 billion, affected by a five-business-day shutdown at the end of the month due to the Lunar New Year holiday. Semiconductor exports rose 7.2% to $10.22 billion but showed a smaller increase compared to last year, which had double-digit growth. Last year, annual semiconductor exports surged 42.8% compared to the previous year.

Imports totaled $47.31 billion, down 6.2%. Amid continued declines in raw materials due to falling energy prices, the growth rate of capital goods slowed, and consumer goods also decreased, turning negative after one month. Raw material imports in January, based on customs clearance, were $25.36 billion, down 9.8% year-on-year. Coal dropped sharply by 35.5% to $1.23 billion, and gas (-20.2%), chemical products (-11.4%), crude oil (-5.5%), and petroleum products (-2.8%) also decreased. Capital goods imports were $17.79 billion, up only 0.9%. Transportation equipment increased 24.9% to $1.16 billion, and semiconductors rose 8.3% to $6.14 billion, but information and communication devices fell 8.5% to $2.45 billion, and machinery and precision instruments decreased 3.8% to $5.18 billion. Consumer goods imports were $7.85 billion, down 10.3%, with declines in grains (-22.7%), non-durable consumer goods (-10.5%), passenger cars (-8.2%), and direct consumer goods (-7.2%).

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The services account, which includes travel and transportation, recorded a deficit of $2.06 billion. The travel account deficit widened to $1.68 billion compared to the previous month (-$950 million) and the same month last year (-$1.51 billion). The winter vacation marked a peak season for overseas travel, and the long Lunar New Year holiday further increased the number of departures. The transportation account recorded a surplus of $560 million, increasing from $190 million in the previous month and $30 million in the same month last year, due to reduced payments for ship charter fees and other transportation expenses.

The primary income account showed a surplus of $2.62 billion, mainly from dividend income. The usual expansion of securities investment dividend income seen at the end of each year disappeared, reducing the surplus compared to the previous month ($4.76 billion). However, due to the steady increase in net external financial assets, interest and dividend income rose, increasing the surplus compared to the same month last year ($1.69 billion). The secondary income account recorded a deficit of $120 million.

The net financial account, which is assets minus liabilities, increased by $3.72 billion. Direct investment saw a $940 million decrease in domestic investors' overseas investments, while foreign investors' domestic investments increased by $1.23 billion. Securities investment showed a $12.55 billion increase in domestic investors' overseas investments, mainly in stocks, while foreign investors' domestic investments decreased by $290 million, also mainly in stocks. Derivative financial instruments increased by $1.02 billion. Other investments saw assets increase by $1.54 billion, mainly in cash and deposits, while liabilities rose by $4.97 billion, mainly in other liabilities. Reserve assets decreased by $4.55 billion.

In February, the current account surplus is expected to expand, centered on the goods account. Song said, "The trade balance based on customs clearance turned from a deficit of $1.86 billion in January to a surplus of $4.3 billion in February," adding, "An expansion in the goods account surplus is also expected in the current account for February."

The Bank of Korea lowered its forecast for this year's current account surplus to $75 billion in last month's revised economic outlook, down from the $80 billion forecast in November last year. This reflects concerns about the global low-growth trend and uncertainties in the U.S. Trump administration's trade policies. Although only January results, the start of the year, have been released, this beginning is considered sufficient to meet the lowered forecast. Song said, "Overall, the surplus is expected to shrink compared to last year ($99 billion), but the IT export growth trend is expected to continue," adding, "However, the non-IT sector is likely to remain sluggish due to the expansion of Chinese products in the global supply market and the possibility of tariff increases on major items."

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