Strong semiconductor exports are expected to push South Korea's annual current account surplus above the Bank of Korea's projections. Despite a significant surplus, the won-dollar exchange rate remains in the 1,500 won range, influenced by foreign capital flows.
According to the Bank of Korea's preliminary report on the 'International Balance of Payments for May 2026' released on July 8, the cumulative current account surplus for January to May this year reached $141.28 billion. This figure is nearly five times higher than the $33.9 billion recorded during the same period last year, driven by robust exports, particularly in semiconductors.
In May, the Bank of Korea revised its annual current account surplus forecast from $170 billion to $250 billion, an increase of $80 billion. This adjustment reflected strong semiconductor exports, improvements in the information technology sector, and solid trends in the goods balance.
Given the current trends, there is a strong possibility that the annual forecast will be exceeded. With expectations of continued strong exports in the second half of the year, there are also predictions that next year's current account forecast of $190 billion may be revised upward.
Yoo Seong-wook, head of the Bank of Korea's Financial Statistics Department, stated, "At the time of the May forecast, we expected a current account surplus of $151.5 billion for the first half of the year. If the June surplus exceeds $10 billion, we will meet that forecast." He added, "Considering the export trends in June, there is a possibility that the annual forecast will be raised."
He noted that while exports exceeded $100 billion in June, driven by semiconductors, other components such as the services balance also need to be considered. Overall, a significantly high current account surplus is anticipated.
However, the won-dollar exchange rate has remained in the 1,500 won range since May 15, showing little decline despite the record current account surplus. This is because foreign capital outflows have a greater impact on the exchange rate than the influx of dollars from the current account.
According to international balance of payments statistics, foreign investment in domestic securities fell by $24.65 billion in May, marking the second-largest decline on record. Notably, stock investments saw a net outflow of $31.05 billion, the largest drop since statistics began.
The recent significant rise in the domestic stock market has led to increased portfolio rebalancing demands from global institutional investors, coupled with ongoing dollar strength, resulting in heightened pressure for foreign capital outflows. Despite a steady influx of dollars from the goods balance, outflows through the financial account have largely offset this.
Yoo added, "While a current account surplus can increase foreign currency supply and impact the exchange rate, it is important to note that the exchange rate is influenced not only by the current account but also by foreign stock investments and other factors. Therefore, it is difficult to expect immediate exchange rate stability simply because the current account surplus has increased."
* This article has been translated by AI.
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