Foreign IBs Raise Outlook for Korea's Current Account... "Near 15% of GDP This Year"

Six Out of Eight IBs Forecast "Over 15% Ratio"

Citi Predicts "Annual Surplus Exceeding 400 Billion Dollars"

Booming Semiconductor Exports Drive Record Numbers

Skepticism Remains for Recovery in Non-IT Exports

Driven by the robust performance of semiconductor exports, South Korea is continuing to post record-high current account surpluses, prompting overseas investment banks (IBs) to repeatedly raise their forecasts. Some experts now predict that the ratio of the current account surplus to nominal GDP will reach the highest level in the world this year, with a few even expecting the surplus to exceed 400 billion dollars for 2026.

According to the Korea Center for International Finance, as of the end of July, eight major overseas IBs projected that the ratio of South Korea's current account surplus to GDP in 2026 will average 14.7%. This is an increase of 0.7 percentage points from the 14.0% forecast at the end of June, marking the seventh consecutive monthly upward revision since January this year.

Looking at the details, four of the eight IBs raised their forecasts for the current account surplus-to-GDP ratio. JP Morgan notably made the largest upward adjustment, from 14.8% to 19.7%. Barclays raised its projection from 13.0% to 15.3%, and Nomura from 15.5% to 15.7%. Citibank, as of the end of July, further increased its estimate from 16.5% to 18.5%. Six out of the eight IBs, except UBS (4.0%) and Goldman Sachs (13.9%), expect this year’s ratio to exceed 15%.

A 15% ratio is considered high by global standards. According to the Bank of Korea, Ireland topped the global rankings in 2024 with a 15.7% current account surplus-to-GDP ratio, followed by Norway at 15.5% and Denmark at 12.2%. At that time, South Korea was in ninth place with 5.3%. Since then, South Korea’s ratio increased to 6.5% last year, and is estimated at 14.7% for the first quarter of this year.

Some overseas IBs also suggest that South Korea’s annual current account surplus could exceed 350 billion dollars. In particular, Citibank, in a report released on July 5, raised its current account surplus-to-GDP ratio forecast to 18.5% and projected that the annual surplus will reach 405 billion dollars this year. With the likelihood of surpassing 300 billion dollars for the first time already high, there are expectations that even 400 billion dollars may be within reach. BNP Paribas, in a recently published report, also forecast South Korea’s annual current account surplus at 383.2 billion dollars.

The cumulative current account surplus in the first half of this year reached 191.01 billion dollars, already surpassing last year's annual surplus of 123.1 billion dollars. In its economic outlook in May, the Bank of Korea predicted an annual surplus of 250 billion dollars this year. Looking ahead to next year, Citibank and BNP Paribas forecast surpluses of 429.8 billion dollars and 314.7 billion dollars, respectively, suggesting that high surpluses will continue for a second consecutive year.

The background behind these record-setting figures lies in the unexpectedly strong semiconductor export performance. Citibank expects South Korea’s semiconductor exports to increase by 181% compared to the previous year. Jinwook Kim, Citi economist, commented, “The quarterly growth rate may soar to 203% in the third quarter, followed by a slowdown due to base effects from the fourth quarter. Nonetheless, in the mid- to long-term, five-year long-term agreements (LTAs) between Samsung Electronics and major semiconductor buyers will further strengthen the sustainability of robust semiconductor exports and continued current account surpluses.”

However, while some IBs remain optimistic about semiconductor exports, they are cautious regarding the recovery of non-IT exports. Nomura pointed out that although the range of export growth items expanded in July of this year, IT products accounted for 69% of the total increase, indicating that export growth is heavily concentrated in artificial intelligence (AI) and semiconductors. The improvement in non-IT exports, according to Nomura, is mainly attributed to price increases rather than volume expansion. HSBC also noted that rising tensions in the Middle East are likely to weigh on non-IT exports and suggested that a broader recovery across non-IT sectors is needed to support domestic growth going forward.

This content was produced with the assistance of AI translation services.