🚨 Korea's $5.7 Billion Current Account Surplus: 24 Months of Continuous Surplus, Recession-Type Surplus Concerns Are Premature

Today Korean Economic News | 2025.06.11

📌 Strong semiconductor and steel exports lead to 3rd highest April surplus ever, positive signal for achieving first-half target

💬 The Bank of Korea announced that Korea's April 2025 current account surplus reached $5.7 billion, continuing a 24-month streak of surpluses. This is the 3rd highest April surplus on record, driven mainly by strong performance in key exports like semiconductors and steel, plus reduced imports due to falling energy prices. The Bank of Korea forecasts that achieving the first-half current account surplus target of $37.8 billion is possible, and stated that concerns about a 'recession-type surplus' are premature. The assessment is that this shows a healthy surplus structure, with export growth contributing more than import reduction.

1️⃣ Easy Explanation

Good news came out showing that Korea is earning a lot of money from trading with other countries. We've been making profits for 24 months straight (2 years), which shows our economy is strong and healthy.

Current account balance is like a 'national household budget.' It's the money Korea earns by selling things to other countries minus the money we spend buying things from other countries. When it's positive, we call it a surplus. When it's negative, we call it a deficit.

Recording a $5.7 billion surplus in April means Korea earned $5.7 billion more from selling things abroad than we spent buying things from abroad. This is about 7.6 trillion won, which is a lot of money.

What's especially important is that this surplus is a 'healthy surplus.' Sometimes countries make fake surpluses by cutting imports when the economy is bad - we call this a 'recession-type surplus.' But this time is different. Korea's main products like semiconductors and steel became popular overseas, so our exports increased.

Semiconductors are key parts that go into all electronic devices like smartphones, computers, and cars. As AI technology develops worldwide, demand for semiconductors is growing rapidly. Korea has world-class technology in this field (ranked 1st or 2nd globally), so our exports increased a lot.

Steel is a basic material used in construction, cars, shipbuilding, and many other industries. As the world economy recovers, countries are investing more in infrastructure, so steel demand is also increasing.

Meanwhile, imports decreased mainly because energy prices like oil and gas went down. Korea depends almost entirely on imports for energy, so when international oil or gas prices fall, our import costs drop significantly.

The Bank of Korea expects that if this trend continues, we can achieve our first-half current account surplus target of $37.8 billion this year. This is a positive sign that Korea's economy is running stably.

Continuing current account surpluses means Korea is selling many competitive products overseas, which helps create jobs and grow the economy.

2️⃣ Economic Terms

📕 Current Account Balance

Current account balance shows the difference between money a country earns and spends in foreign trade.

• It includes trade balance (exports-imports), services balance, primary income balance, and secondary income balance.
• A surplus means earning more money from foreign countries, while a deficit means spending more money abroad.
• Current account balance is an important economic indicator showing a country's external health.

📕 Recession-Type Surplus

Recession-type surplus means an artificial surplus created when imports drop sharply due to economic recession.

• It happens when exports decrease but imports fall even more due to weak domestic demand.
• This type of surplus is considered unhealthy because it comes from economic difficulties.
• In contrast, surpluses led by export growth are classified as healthy surpluses.

📕 Trade Balance

Trade balance is the difference between export value and import value of goods.

• It's the biggest part of current account balance and determines whether the overall current account is surplus or deficit.
• Korea usually records trade surpluses as a strong manufacturing country.
• Main export items include semiconductors, cars, steel, and chemicals.

📕 Foreign Exchange Reserves

Foreign exchange reserves are the total amount of foreign money and gold that a country holds.

• Continuous current account surpluses increase foreign exchange reserves.
• They're used as defense tools during foreign exchange crises or sudden exchange rate changes.
• Korea's foreign exchange reserves are about $410 billion, ranking 8th worldwide.

3️⃣ Analysis and Economic Outlook

✅ Healthy Surplus Structure Led by Strong Semiconductor Exports

• Let's analyze the semiconductor industry recovery that led April's current account surplus and what it means.

  • First, surging AI semiconductor demand is driving Korea's exports. As artificial intelligence technology develops globally and data center construction becomes active, demand for high-performance semiconductors is exploding. Memory semiconductors produced by Samsung Electronics and SK Hynix are key components for AI servers, with exports increasing over 30% compared to last year. Particularly, exports of high-value products like HBM (High Bandwidth Memory) surged, significantly raising export prices. As US big tech companies and Chinese cloud companies compete to invest in AI infrastructure, orders for Korean semiconductors are flooding in. This is a very positive signal for Korea's economy, as semiconductors play a key role in current account surplus when they account for over 20% of total exports.

  • Second, steel industry recovery is also contributing to surplus expansion. As the world economy recovers from the COVID-19 pandemic, infrastructure investment and construction are reviving in various countries. Particularly, large-scale infrastructure investments through the US Infrastructure Investment Act and Europe's Green Deal policy are increasing demand for high-quality steel. Korean steel companies like POSCO and Hyundai Steel are recognized for their competitiveness in eco-friendly technology and high-strength steel, leading to increased exports. Also, with shipbuilding industry recovery, demand for ship plates is growing, positively affecting steel exports. China's steel industry restructuring has also helped increase the relative competitiveness of Korean steel.

  • Third, export-led surpluses bring positive ripple effects to the overall economy. When exports increase, production and employment in related manufacturing companies grow, creating a virtuous cycle that leads to domestic economic recovery. Semiconductor and steel industries have very wide related industries including parts suppliers and logistics companies, creating significant employment effects. Particularly, the semiconductor industry has many high-skilled jobs, contributing to quality job creation for young people. When foreign exchange reserves increase due to current account surpluses, external credibility also improves, helping attract foreign investment. If this virtuous cycle continues, Korea's economic structure can become more solid.

• Strong semiconductor and steel exports show that Korea's technological competitiveness and manufacturing base remain solid. However, the structural vulnerability of high dependence on specific industries is also a challenge to consider.

✅ Reduced Energy Imports and Trade Balance Improvement

• Let's examine the positive impact of falling energy prices on current account balance.

  • First, falling international oil and gas prices greatly contributed to import cost reduction. Since 2025 began, international oil prices have maintained around $70 per barrel, falling about 15% compared to last year. Despite the prolonged Russia-Ukraine war, increased US shale oil production and reduced demand due to China's economic slowdown contributed to oil price stability. Natural gas prices also fell significantly due to Europe's warm winter and LNG supply diversification. Since Korea depends almost entirely on energy imports, energy price changes have a huge impact on current account balance. Monthly energy import amounts decreased by over $2 billion compared to last year, playing a decisive role in trade balance improvement. This is giving Korea's economy a kind of 'bonus' effect.

  • Second, the results of crude oil import diversification policy are showing. The government's energy supply source diversification policy is proving effective. Crude oil import dependence on the Middle East, which exceeded 80% in the past, has now decreased to around 70%, improving price negotiation power. Crude oil imports from the US, Norway, and Brazil have increased, advancing supply source diversification. For LNG, in addition to Qatar and Australia, expanded imports of US shale gas have secured price competitiveness. Energy import contracts also appropriately combine long-term and spot contracts to reduce price volatility risks. These policy efforts are leading to energy import cost reduction, contributing to current account improvement.

  • Third, expanded renewable energy investment is contributing to long-term energy independence improvement. According to the government's Green New Deal policy, renewable energy generation facilities like solar and wind power are steadily increasing. Although the proportion in total energy supply is still low, it shows an increasing trend every year, expected to contribute to reducing energy import dependence in the long term. Particularly, when offshore wind power generation and hydrogen energy development begin in earnest, energy independence can improve significantly. Stable operation of nuclear power generation is also an important factor in reducing energy import dependence. Nuclear power currently accounts for about 30% of total electricity production, playing an important role in energy security.

• Energy import cost reduction directly helps Korea's economy, but fundamentally, increasing energy independence and accelerating the transition to eco-friendly energy will be the long-term solution.

✅ Sustainability of Current Account Surplus and Future Outlook

• Let's analyze the sustainability of 24 months of continuous surplus and second-half outlook.

  • First, the sustainability of semiconductor boom is a key variable. As long as AI technology development and data center investment continue, semiconductor demand is expected to maintain strength for the time being. Particularly, as generative AI services become fully commercialized, demand for high-performance semiconductors will increase further. Samsung Electronics and SK Hynix have secured technological superiority by successfully developing next-generation HBM. However, China's semiconductor technology catch-up and intensifying US-China trade conflicts could act as variables. If China expands its own semiconductor production capacity, demand for Korean semiconductors could decrease, and if the US strengthens semiconductor export regulations to China, Korean companies could also be indirectly affected. Therefore, geopolitical risks in the semiconductor industry need careful monitoring.

  • Second, services balance improvement is important for current account stabilization. Korea records large surpluses in trade balance but shows chronic deficits in services balance. Particularly, the travel balance deficit is large because Koreans' overseas travel spending is much more than foreigners' spending on Korea tourism. As overseas travel normalized after COVID-19, this deficit is expanding again. The government is pursuing policies to increase foreign visitors to Korea using K-culture popularity, and expand medical tourism and education service exports. It's also trying to increase IT service and intellectual property exports. If services balance deficits can be reduced, current account surplus stability will improve significantly.

  • Third, responsiveness to global economic environment changes is important. Changes in US interest rate policy, China's economic recovery speed, and European economic stability can greatly affect Korea's exports. Particularly, economic trends in major export countries like the US and China need careful observation. Exchange rate fluctuations are also important variables. If the won becomes excessively strong, export competitiveness could weaken, while rapid weakening could lead to import price increases. The government should increase resilience to external shocks through export market diversification and discovering new growth engines. Securing competitiveness in future industries like bio, eco-friendly, and digital is key to long-term current account stability.

• The current account surplus trend is expected to continue for the time being, but excessive surplus could constrain monetary policy, so management at appropriate levels is needed. Balanced growth through maintaining export competitiveness while strengthening domestic demand base is important.

4️⃣ Conclusion

April's $5.7 billion current account surplus and 24 months of continuous surplus are positive signals showing Korea's solid economic fundamentals. Key export products like semiconductors and steel remain competitive, and external favorable factors like falling energy prices are creating a healthy surplus structure.

What makes this surplus particularly meaningful is that it's a 'healthy surplus' led by export growth. Rather than a recession-type surplus created by sharply reduced imports due to economic recession, this results from increased exports as our products gain recognition for their overseas competitiveness. This creates a virtuous cycle leading to job creation and economic growth.

The semiconductor industry's AI boom is expected to continue for the time being, and the technological superiority of Samsung Electronics and SK Hynix is solid. The steel industry is also positive as demand increases due to global economic recovery and infrastructure investment expansion. Energy import cost reduction is also directly helping Korea's economy.

However, we shouldn't be complacent. Geopolitical risks in the semiconductor industry, China's technology catch-up, and services balance deficits are still challenges to solve. Reducing dependence on specific industries and discovering new growth engines is important.

The government forecasts that achieving the first-half current account surplus target of $37.8 billion is possible. If this surplus trend continues, foreign exchange reserves will increase and external credibility will improve, strengthening overall economic stability.

Current account surplus is certainly good news, but more importantly, we need to use this as a foundation to build future competitiveness and make our economic structure more solid. Now is the time to build sustainable growth foundations without being satisfied with current achievements.