The Bank of Korea announced on the 9th that the current account surplus for March exceeded $9.1 billion. This marks the 23rd consecutive month of surplus, following the record for the third longest streak since the 2000s, after May 2012 to March 2019 (83 months) and May 2020 to August 2022 (27 months). The current account continues its surplus trend as exports of semiconductors and computers increase.
The current account for April is expected to show a surplus, thanks to the fact that the impact of the tariff war initiated by U.S. President Donald Trump has not yet fully materialized. However, the Bank of Korea believes that the current account will inevitably be affected over the entire year. It forecasts that the annual current account will be lower than the initial estimate of $75 billion.
◇ Current account surplus of $9.14 billion in March… 3rd largest for March on record
According to the 'preliminary balance of payments for March 2025' announced by the Bank of Korea on the 9th, the current account surplus for last March was recorded at $9.14 billion. This is approximately $2 billion more than the previous month (February at $7.18 billion) and about $2.2 billion more than last March ($6.99 billion).
This surplus is the third largest for March, following March 2016 and March 2015. As a result, the current account surplus for the first quarter reached $19.26 billion, an increase of $2.8 billion compared to the first quarter of last year ($16.48 billion). This marks the eighth consecutive quarter of surplus.
The substantial current account surplus is attributed to the widening surplus in the primary income account. The primary income account, which reflects wages, dividends, and interest flows, was recorded at $3.23 billion, an increase of $1.3 billion compared to March last year ($1.88 billion) and about $800 million more than the previous month ($2.62 billion). In this regard, Shin Seung-cheol, Director General of the Bank of Korea's Economic Statistics Department, noted, "The increase in dividend income is due to the expansion of domestic investment overseas, leading to a rise in net worth in foreign finance."
Exports increased by 2.2% year-on-year to $59.31 billion. The increase was attributed to a rebound in semiconductor exports and an increase in computer exports after one month. By item, exports of computer peripherals (31.7%), pharmaceuticals (17.6%), semiconductors (11.6%), and passenger cars (2.0%) increased, while petroleum products (-28.2%) and steel products (-4.9%) decreased. Imports also rose by 2.3% to $50.82 billion during the same period. Although imports of raw materials such as coal, petroleum products, and crude oil decreased by 7.5%, imports of capital goods like semiconductor manufacturing equipment and semiconductors increased by 14.1%.
The services account showed a deficit of $2.21 billion. Although it was a deficit, the amount was less than the previous month (-$3.21 billion) and compared to March last year (-$2.74 billion). This is due to a decrease in overseas travel demand as the winter vacation ended and a peak season for domestic travel by foreigners in spring, leading to a reduction in the travel account deficit to $720 million, half the level of the previous month ($1.45 billion).
◇ Surplus expected to continue until April… Annual current account target adjusted downwards
The Bank of Korea anticipates that the current account for April, to be announced next month, will show a surplus. The trade balance based on customs from last month is similar to that of March. Accordingly, the goods account, which constitutes a significant portion of the current account, is expected to be similar for April and March.
April is a seasonally high period for foreign dividends, indicating that the primary income account may show a deficit. Director Shin noted, "Even if there is a deficit in the primary income account, the surplus in the goods account will be significant," adding, "It will be much lower than March, but the current account will maintain its surplus flow."
On an annual basis, the impact of U.S. tariff policy is becoming increasingly inevitable. In February, the Bank of Korea projected this year's current account surplus at $75 billion. Director Shin stated, "The impact of U.S. tariff policy is stronger than expected and (the targets) will be broadly implemented," and added, "The current account is expected to be lower than anticipated."
However, it did not predict exactly how much it would decrease. Director Shin stated, "We may need to adjust the forecast for the current account, but the uncertainty is high, so we need to check various situations on how much we will adjust it."
In terms of specific items, the effect of tariffs is still not significant. While the export of automobiles to the U.S. has decreased due to the temporary demand slowdown for electric vehicles and the 25% tariff policy, it is not something to be overly worried about, according to the Bank of Korea's judgment. Director Shin noted, "Prior to the imposition of tariffs on automobiles, companies shipped early, and there is also a part that fulfills (demand) with local inventory in the U.S.," adding, "Automobile sales performance in the U.S. is healthy, and this trend is expected to continue to some extent."
The same applies to semiconductors. Director Shin stated, "The Trump administration has indicated it will revise the semiconductor regulatory policy implemented during the Biden administration," adding, "How China responds will be an issue."
However, the Bank of Korea believes that the adverse effects of U.S. tariff policy on our exports will become more significant. Director Shin stated, "As time goes on, the effects of the tariff policy will become more pronounced," and added, "Tariffs on pharmaceuticals will be announced soon."
The same goes for semiconductors. Director Shin stated, "The Trump administration has indicated it will revise the semiconductor regulatory policy implemented during the Biden administration," adding, "How China responds will be an issue."