BOK briefing on July balance of payments (preliminary)

Semiconductor-led expansion continues despite base effect

Semiconductors remain key to $450B annual surplus target

Exchange rate impact seen as limited vs. chip demand

Yoo Seong-wook, head of the Bank of Korea's financial statistics department, speaks at a briefing on the preliminary balance of payments for July 2026, held Friday morning. [Bank of Korea]
Yoo Seong-wook, head of the Bank of Korea's financial statistics department, speaks at a briefing on the preliminary balance of payments for July 2026, held Friday morning. [Bank of Korea]

South Korea's current account surplus has kicked off the second half of the year with record-breaking results, extending the momentum from the first half on the back of strong IT exports led by semiconductors. With the recent decline in the won-dollar exchange rate expected to have only a limited impact on the surplus, the Bank of Korea's target of a $450 billion annual current account surplus is increasingly within reach.

Yoo Seong-wook, head of the Bank of Korea's financial statistics department, said at a briefing Friday morning on the preliminary balance of payments for July 2026 that exports and the goods trade balance typically dip in July compared with the previous month. "Export companies tend to concentrate shipments in June to manage their first-half performance, and overseas travel surges during the summer holiday season," he said. "Even so, exports — led by semiconductors — exceeded $100 billion for two consecutive months, and dividends from overseas subsidiaries boosted primary income, pushing the surplus to more than three times the level of a year earlier."

The latest export growth was again driven by the IT sector, particularly semiconductors. According to the Ministry of Trade, Industry and Energy, semiconductor exports reached $41.01 billion in July, accounting for about 41.5 percent of total exports of $98.89 billion. Fixed-price chip prices continued to rise despite concerns about Apple potentially sourcing Chinese-made memory chips and China's announcement of new AI models, keeping the overall trend solid.

Yoo also struck an upbeat note on August's current account, saying the trade balance had improved from July. August exports came in at $98.25 billion — slightly below the all-time records set in June and July ($102 billion and $99 billion, respectively) but still the third-highest on record. The trade surplus widened to $34.7 billion in August, up from $30.4 billion in July.

The strong July reading has raised the odds of hitting the Bank of Korea's annual current account surplus target of $450 billion. Last month, the BOK revised its full-year surplus forecast up by $200 billion from its previous estimate of $250 billion to $450 billion. The second-half surplus alone is projected at $259 billion — more than double last year's full-year surplus of $123.1 billion. By simple arithmetic, averaging a monthly surplus of about $43.38 billion over the remaining five months would be enough to reach the $450 billion annual target.

"If the monthly current account surplus stays around $43 billion over the next five months, we should hit the projected figure," Yoo said. "The key variable going forward is the semiconductor cycle." He added that South Korea's first-half current account surplus ranked second globally, behind only China. "Last year, China, Germany, Taiwan and others were all ahead of us, but on a first-half basis we have now overtaken Germany, Japan and Taiwan," he said.

The Bank of Korea also views the negative impact of the won's strengthening against the dollar — a trend in place since July — as limited. In general, a falling won-dollar rate, meaning a stronger won, weighs on the current account surplus. As the won strengthens, Korean goods become more expensive in dollar terms for overseas buyers even if domestic prices remain unchanged, which tends to reduce exports and narrow the surplus.

The won has been on a strengthening trend since July. The won-dollar rate, measured by the weekly closing price, hit a post-global financial crisis high of 1,555.8 won on July 2 — the strongest dollar reading since March 5, 2009 (1,568 won) — before falling steadily, dropping to the 1,360-won range on Monday for the first time in about 13 months. On Thursday, the rate fell further to the 1,350-won range during trading, a level not seen since July 4 last year, when it stood at 1,358.2 won.

"A stronger won theoretically puts downward pressure on the current account," Yoo said, "but recent growth in goods exports has been driven by semiconductors and is being shaped by structural demand tied to AI investment, so the exchange rate effect is limited — supply and demand are the bigger drivers."

The Bank of Korea also expects the renewed tensions between the United States and Iran to have only a limited effect on the current account. "The Middle East conflict could affect energy prices on the import side, but alternative and indirect import routes have expanded recently, so while there will be some impact, it will be minor compared with the semiconductor sector," Yoo said. "Exports to the Middle East are not large either, so the overall effect should be minimal."


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