Korea's Q2 current account surplus tops Germany, Japan combined on chip boom
Samsung Electronics and SK hynix chips are loaded onto a Korean Air cargo aircraft bound for Hong Kong at Incheon International Airport, July 30. Joint Press Corps
Concerns grow over reliance on higher chip prices as AI demand could cool
Korea’s current account surplus exceeded the combined total of manufacturing powerhouses Germany and Japan in the second quarter of this year for the first time since comparable data for all three countries became available in 1996, data showed Sunday.
Booming semiconductor exports have pushed the trade surplus to record highs, while expanding overseas investments have boosted dividend and interest income.
The International Monetary Fund (IMF) expects Korea's current account surplus to rank second globally behind China this year, with the largest increase among 190 countries.
However, experts warned that a global slowdown in artificial intelligence (AI) investment or increased supply from rival chip exporters could threaten the gains, highlighting the need to diversify the country's industrial base.
According to IMF data compiled by the Bank of Korea (BOK), Korea posted a current account surplus of $116.6 billion in the second quarter, ranking second behind China among 36 major economies for which data was available.
Germany ranked third with $52.3 billion, followed by Japan with $50.6 billion. These two countries' combined surplus of $102.9 billion was $13.7 billion less than Korea's surplus.
Korea’s second-quarter current account surplus surged 310 percent from $28.4 billion a year earlier, an increase of $88.3 billion. Germany and Japan, by comparison, recorded gains of 12 percent and 5 percent, respectively.
Korea maintained its lead into the third quarter, recording a current account surplus of $88.2 billion in July and August, compared with a combined $80.8 billion for Germany and Japan.
Korea’s current account surplus this year is likely to surpass last year’s record high of $123.1 billion. The IMF projects Korea's annual current account surplus at about $422 billion this year. The increase is expected to be the largest among 190 economies.
The BOK offered a more optimistic outlook, saying in its latest assessment of economic conditions last week that the annual surplus is likely to exceed its previous forecast of $450 billion, citing strong semiconductor exports.
Containers bound for export are stacked at a port in Busan, Oct. 1. Yonhap
The widening current account surplus has been fueled by the global AI boom, which has driven up demand for memory chips used in AI servers and data centers.
According to the Ministry of Data and Statistics, the country's semiconductor exports reached $113.89 billion in the second quarter, up 181.6 percent from a year earlier. It rose further to $148.02 billion in the third quarter, a 218.7 percent increase from the same period last year.
But economists warned that Korea should not rely too much on the semiconductor boom to sustain its current account surplus.
Notably, the IMF expects Korea's current account surplus to remain above $400 billion in 2027 and 2028, before falling to $295.7 billion in 2029 and $177.5 billion in 2031.
"While the increase in the overall surplus is a positive indicator, it could also be an illusion created by the semiconductor boom. The government should not formulate policies on the assumption that the semiconductor boom will continue," said Kang Sung-jin, a professor of economics at Korea University.
"The government and private sector should work together to restructure industries such as petrochemicals and steel and shift toward higher-value-added products," he added.
The U.S. midterm elections on Nov. 3 could also affect Korea's semiconductor exports by shaping the outlook for AI investment.
A report released earlier this month by the BOK's New York office warned that a Democratic sweep of both chambers could lead to tighter AI regulations and dampen investment. A slowdown in global AI investment could lead to weaker demand for memory chips.
"The market expects a Democratic sweep to weaken investment sentiment amid concerns over AI regulation and increased uncertainty surrounding a change in administration, slowing the industry's growth. As a result, interest rates, particularly long-term yields, and stock prices are expected to fall, while the U.S. dollar is expected to weaken," the report said.