As South Korea's current account surplus hits a record high this year, concerns are mounting that the International Monetary Fund could bring the issue of an undervalued won into public debate. The IMF recently revised its economic assessment model for Korea and lowered its estimate of the country's appropriate surplus level. The fund's point is that Korea is earning far more dollars abroad than its overall economic size would warrant. While the IMF did not directly address the exchange rate, the assessment could lead to arguments that the won is excessively undervalued relative to the size of Korea's current account surplus. Experts said Korea must be able to explain both the one-off boost from the semiconductor boom and the structural conditions of an export-dependent economy.
The current account surplus came to $46.11 billion in August, the second-largest monthly figure on record, according to the Bank of Korea on the 12th. The goods account surplus was $46.81 billion, and the cumulative surplus for January through August swelled to $279.2 billion.
The concern is that the IMF has trained its focus on Korea's current account surplus in revising its assessment model. According to the BOK, the appropriate current account level the IMF calculated for Korea fell 1.4 percentage points, from 4.7% of gross domestic product in 2024 to 3.3% in 2025. Separately, an analysis isolating the effect of the model revision alone, holding other conditions equal, found that changes to the demographic component lowered the appropriate current account level by 1.1 percentage points. That was the largest decline among the 26 economies compared. If a change to the net foreign assets component takes effect next year, the appropriate level for 2026 could fall a further 0.74 percentage point. In effect, Korea's surplus could be judged increasingly excessive even if the actual surplus does not grow.
The BOK believes the IMF model does not sufficiently reflect Korea's savings structure. The IMF assumes that older people save less and spend more after retirement, but in Korea the average propensity to save among households headed by people aged 65 and over is higher than that of all households. The analysis holds that the gap between the actual surplus and the appropriate level has widened because the model does not adequately capture a Korean trait — continued saving driven by anxiety about retirement.
Capital flows, in which dollars earned through exports flow back out through overseas investment, are another variable. Domestic investors' overseas securities investment rose by $16.6 billion in August, while foreign investors' holdings of Korean securities fell by $4.85 billion. Even as the current account surplus grows, an outflow of dollars through overseas investment may not translate into a stronger won.
Members of the BOK's Monetary Policy Board have accordingly noted several times in this year's minutes the need for a new won index that reflects both residents' overseas investment and foreigners' investment in Korea.
At the board's August meeting, one member said it was necessary to try calculating a won index that also reflects the sharp expansion in domestic investors' overseas securities investment and foreign investors' securities investment in Korea. The real effective exchange rate, which is calculated mainly on trade weights and prices, has difficulty capturing capital flows. Because neither the IMF model nor existing exchange rate indicators sufficiently capture Korea's savings structure and dollar inflows and outflows, the argument goes, a gauge that takes both trade and financial flows into account is needed.
An IMF assessment does not translate directly into sanctions, but it could be used as grounds when major trading partners interpret Korea's surplus as an unfair competitive advantage and demand that the won appreciate.
One foreign exchange market expert said the IMF's model revision could be read as international pressure on surplus countries, adding that Korea could be affected by the debate over global imbalances even if it is not a direct target.