Last year, the current account recorded a surplus of over $99 billion, setting the second-highest record in history. The strong performance in semiconductor exports significantly contributed to the trade balance, where the goods balance, which is exports minus imports, exceeded $100 billion. However, this year, external uncertainties are expected to increase due to the U.S. new government's tariff policy becoming more concrete, leading to a decrease in the surplus size compared to the previous year.
◇ Last year's current account surplus of $99.4 billion… Second highest record since 2015
According to the Bank of Korea's 'Preliminary balance of payments for December 2024' announced on the 6th, last year's current account recorded $99.04 billion. The surplus size is the second largest after 2015 ($105.12 billion). It is also $9.04 billion more than the Bank of Korea's forecast of $90 billion from November last year.
The goods balance (exports minus imports) recorded a surplus of $10.013 billion, leading to overall performance. This marks the first time the goods balance has exceeded $100 billion since 2018 ($110.09 billion). Exports increased by 8.2% ($52.62 billion) compared to a year ago, while imports decreased by 1.6% ($9.85 billion), contributing to the surplus in the goods balance.
By item (customs standards), exports related to artificial intelligence (AI) surged. The exports of semiconductors were recorded at $143.77 billion, up 42.8%, and information and communication technology (IT) also increased by 17.4% to $42.34 billion. Ship exports increased by 17.7% to $24.5 billion, and home appliances increased by 3.4% to $8.37 billion.
The service balance recorded a deficit of $23.7 billion, while the primary income balance recorded a surplus of $26.62 billion. The service balance's deficit was narrowed by $3.12 billion compared to a year ago, and the surplus in the primary income balance increased by $430 million. In particular, the investment income, which is a component of the primary income balance (dividends + interest), recorded a surplus of $28.57 billion, marking the highest level since related statistics began in 1980.
In December of last year, the current account also set a record for the highest surplus for that month, contributing to the overall current account surplus. The current account for December recorded a surplus of $12.37 billion, widening the surplus by $2.32 billion compared to the previous month ($10.05 billion). The goods balance recorded a surplus of $10.43 billion, and the primary income balance recorded a surplus of $4.76 billion, leading the current account surplus.
Director General Shin Seung-cheol noted, "The expansion of the annual current account last year is primarily due to the robust flow of the primary income balance and the expansion of the surplus size in the goods balance." He added, "In the case of the goods balance, exports recorded their all-time high in both price and quantity, centered around semiconductors and other IT items, while imports continued to decrease mainly for raw materials due to stabilized energy prices."
◇ This year's current account surplus forecast at $80 billion… "Impact of potential export slowdown"
The Bank of Korea expects this year's current account surplus size to decrease compared to last year. This is due to the potential decrease in exports resulting from tariff policies of the Trump administration's second term and a global trend of low growth. The Bank of Korea presented a forecast of an $80 billion current account surplus for this year through its 'Revised economic outlook' in November last year.
The trade balance recording a deficit of $1.89 billion last month is also fueling these concerns. The trade balance had maintained surpluses for 19 consecutive months since June 2023 but turned to a deficit last January. Both the trade balance and the goods balance reflect the difference between exports and imports, but the trade balance is smaller because it also includes freight and insurance fees.
Director General Shin said, "Since exports have been increasing rapidly for 15 consecutive months, even if the increase continues, if the scale doesn't increase significantly, the growth rate will technically fall." He added, "At the same time, as imports of capital goods and consumer goods increase, the growth rate of imports is likely to exceed that of exports, leading to a decrease in the surplus size of the goods balance."
In particular, semiconductor exports, which account for 20% of South Korea's exports, are expected to be impacted. Director General Shin noted, "There was an expectation that the semiconductor upcycle (boom) would continue until the first half of this year, but with the Trump administration taking office, there is a possibility that semiconductor-related laws or the Inflation Reduction Act (IRA) could be nullified, creating a highly uncertain situation." He added, "General-purpose semiconductors are expected to face difficulties due to weak demand and intensified competition."
Regarding the impact from the AI 'DeepSeek' developed in China, He said, "Although it appears that the crisis could grow immediately, there are discussions that it could also be an opportunity to broaden the demand base for AI." He added, "However, I am concerned that if the U.S. imposes stricter semiconductor regulations on China because of this, it could affect our exports."
The Bank of Korea is scheduled to release a new economic outlook reflecting U.S. trade and economic policies this month. Director General Shin said, "While the forecast in November last year reflected Trump's promises to some extent, there is significant policy uncertainty now that specific timings and intensities of trade policy applications have emerged following the inauguration of the new U.S. government." He noted, "We will reflect this in the February outlook and revise the economic outlook accordingly."