In May, the current account recorded a surplus of over $10.1 billion, continuing its surplus streak for 25 consecutive months. The surplus margin is the third largest on record for the same month. However, a 'recession-type surplus' was noted as imports decreased more significantly than exports, and primary exports from major countries also shrank due to the impacts of U.S. tariffs, which hampered the recovery of exports.
The current account is a statistic that sums up the export and import of goods and services, as well as all economic transactions including capital and labor between countries. It is a key indicator of a country's fundamental strength, comprising the goods account, service account, primary income account, and transfer account.
According to the 'Balance of Payments (preliminary)' published by the Bank of Korea on the 4th, the current account recorded a surplus of $10.14 billion in May. This marks the 25th consecutive month of surplus. The surplus scale has doubled from the previous month (+$5.7 billion). Compared to May, it is the third largest surplus, following 2021 (+$11.31 billion) and 2016 ($10.49 billion). It also increased by $1.05 billion compared to May of the previous year (+$9.09 billion).
The goods account (exports - imports) led the overall surplus. The surplus for May was recorded at $10.66 billion, expanding by $1.67 billion from the previous month ($8.99 billion). Compared to a year ago (+$8.82 billion), it increased by $1.84 billion.
However, there are assessments that it is characterized as a 'recession-type surplus' since imports decreased more dramatically than exports. The export amount was recorded at $56.93 billion, down 2.9% compared to the same period last year. This marked a reversal to decline after four months. While semiconductor exports (customs standards) increased by 20.6% compared to a year ago, the growth compared to the previous month (+16.9%) widened, the impacts of declines in non-IT categories such as petroleum products (-20.0%), steel products (-9.6%), and automobiles (-5.6%) were significant.
By region, exports to all markets except Southeast Asia (8.2%) and the European Union (EU 4.0%) decreased. Exports to Latin America (-11.7%) saw the largest drop, followed by Japan (-9.0%), China (-8.4%), the Middle East (-8.2%), and the United States (-8.1%). The decrease in exports to the United States was greater than the previous month (-7.0%), reflecting the impact of tariff policies.
In May, imports recorded $46.27 billion, decreased by 7.2% compared to the previous year. While imports of capital goods (+4.9%) and consumer goods (+0.4%) increased, the decline in raw materials (-13.7%) had a significant impact. By item, transportation equipment (+46.8%), semiconductor manufacturing equipment (+26.1%), and information and communication devices (+16.5%) increased, while coal (-31.6%), petroleum products (-30.0%), grains (-16.4%), and crude oil (-14.0%) declined.
The service account, which encompasses transactions related to travel, transportation, and intellectual property royalties, recorded a deficit of $2.28 billion. The deficit margin narrowed compared to the previous month (-$2.83 billion). Although the travel deficit widened due to holidays such as Labor Day and Children's Day, the increase in royalty income received from overseas subsidiaries by domestic corporations significantly contributed to narrowing the intellectual property account deficit (-$820 million to -$340 million).
The primary income account, which reflects flows of wages, dividends, and interest, showed a surplus of $2.15 billion. This was a significant increase compared to the previous month (-$190 million). In April, there was a large decrease in the dividends account due to payments to foreign investors, but the effect dissipated in May, resulting in a return to surplus. Compared to the previous year (+$1.79 billion), the surplus widened.
The transfer account recorded a deficit of $390 million. The deficit margin increased by $130 million compared to the previous month (-$260 million) and by $100 million compared to a year ago (-$290 million). The transfer account refers to the difference in grants and remittances exchanged between residents and non-residents without compensation.
The net worth of the financial account, which indicates capital inflows and outflows, increased by $6.71 billion. The increase was $2.2 billion larger than the previous month (+$4.51 billion). Foreign direct investment rose by $3.8 billion. In direct investment, domestic investment overseas increased by $4.13 billion, while foreign investment in the country rose by $320 million. Securities investment decreased by $2.68 billion. Domestic overseas investments increased by $10.09 billion, while foreign investments in the country rose by $12.77 billion.