S.Korea posts record July current account surplus on chips; full-year figure seen at $110 billion

South Korea, Asia’s fourth-largest economy, chalked up a record July current account surplus, powered by a surge in semiconductor and car exports, even as policymakers warned that US tariff hikes were beginning to weigh on trade.

Following the buoyant data, a senior Bank of Korea official said on Thursday that the central bank expects this year's full-year surplus to reach an all-time high of $110 billion.

The current account surplus, the broadest measure of Korea’s trade with the rest of the world, totaled $10.78 billion in July, the highest for the month, although the surplus narrowed from $14.27 billion in June.

The latest figure marks the third consecutive month of surpluses above $10 billion and the longest unbroken run since the early 2000s.

In the first seven months of the year, the country recorded a surplus of $60.2 billion, an increase of more than 22% from the same period in the previous year.

“Semiconductor exports are rising more than expected as high-value products such as high-bandwidth memory chips are fueling demand,” said Kim Woong, deputy governor at the BOK, adding that falling crude prices are curbing import bills.

“With oil prices easing from the low $70 range a barrel in the first half to the mid-$60 level in the second half, import prices should continue to fall,” he said.

STRONG EXPORTS OF CHIPS, AUTOMOBILES BOOST SURPLUS

Thursday’s data showed the country’s goods account balance posted a surplus of $10.27 billion in July, up from $8.52 billion a year earlier.

Korea’s exports, which account for half the national economy, rose 2.3% from a year earlier to $59.78 billion last month, buoyed by a 30.6% jump in semiconductor shipments and a 6.3% gain in car exports.

Imports dipped 0.9% on-year to $49.5 billion as lower energy prices outweighed higher purchases of semiconductor equipment and other technology devices.

The services account, which includes outlays by South Koreans on overseas trips, posted a deficit of $2.14 billion, compared to a shortfall of $2.39 billion a year ago.

The primary income account, which tracks wages for foreign workers and dividend payments overseas, logged a surplus of $2.95 billion in July, down from a surplus of $4.16 billion the previous month.

The capital and financial account, covering cross-border investments, posted a net inflow of $11.08 billion in July, down from a net inflow of $17.29 billion in June.

Domestic investors increased their overseas equity purchases by $8.7 billion, while foreign holdings of Korean securities rose by $7.6 billion, primarily in bonds.

GROWING HEADWINDS

Yet officials acknowledged that headwinds are mounting.

Analysts cautioned that while semiconductors could continue to prop up the external balance into next year, tariff frictions risked eroding momentum in other sectors.

“The negative impact of higher US tariffs on automobiles, parts and steel is becoming more visible,” said a BOK official. “The effects will intensify from August, when the US reciprocal tariffs took effect.”

Exports to the US rose only modestly by 1.5%, compared with stronger gains in the EU (8.7%) and Southeast Asia (17.2%), while shipments to China and Japan contracted by 3% and 4.7%, respectively.

Write to In-Soo Nam at isnam@hankyung.com

Jennifer Nicholson-Breen edited this article.