2023 Asian Development Bank Institute. Let's start with my point: the current account balance is neither 'good' nor' bad'. The Asian Development Bank Institute was established in 1997 in Tokyo, Japan, to help build capacity, skills, and knowledge related to poverty reduction and other areas that support long-term growth and competitiveness in developing economies in Asia and the Pacific. It is generally deemed a positive because the current account surplus adds to a country's reserves. Admired for its stability but derided for persistent trade surpluses, the good and bad in Germany's economic model are strongly linked. The current account balance is primarily the difference between a country's total exports and imports of goods and services, usually measured as a share of GDP. The Opium Wars arose from Chinas attempts to suppress the opium trade. When credits exceed debits, the country enjoys a current account surplus, meaning that the rest of the world is in effect borrowing from it. Trade deficits are the difference between how much a country imports and how much it exports. But in countries that are spending a lot more abroad than they are taking in, the current account is the point at which international economics collides with political reality. It is a positive trade balance. An overvalued currency makes imports cheaper and exports less competitive, thereby widening the current account deficit or narrowing the surplus. With intensified risks in emerging markets, ongoing monetary policy normalization in developed markets, US trade protectionism increasingly centered on China and financial conditions tightening, Asias incipient growth slowdown is at risk of accelerating. A current account surplus is a positive current account balance, indicatingthat a nation is a net lender to the rest of the world. The current account records a country's imports and exports of goods and services, foreign investors' payments, and transfers, such as foreign aid. So the exchange rate must appreciate, reducing exports and increasing imports for the domestic country until the trade balance is in equilibrium. After all, there should be a presumption of benignity to each individual transaction, since it is voluntary. For capital-poor developing countries, which have more investment opportunities than they can afford to undertake because of low levels of domestic savings, a current account deficit may be natural. A balance of payments surplus means the country exports more than it imports. 11 What did China have that Europe wanted? Atish Ghosh is an Assistant Director in the IMFs Research Department and Uma Ramakrishnan is a Deputy Division Chief in the IMFs Strategy, Policy, and Review Department. When a country has a trade deficit, it must borrow from other countries to pay for the extra imports. Such reversals can be highly disruptive because private consumption, investment, and government expenditure must be curtailed abruptly when foreign financing is no longer available and, indeed, a country is forced to run large surpluses to repay in short order what it borrowed in the past. In Australia were now talking about current account surpluses. Such nations may take steps to stem the appreciation of their currencies in order to maintain their export competitiveness. Exports, earnings on investments abroad, and incoming transfer payments (aid and remittances) are recorded as credits; imports, foreign investors' earnings on investments in the country, and outgoing transfer payments are recorded as debits. This year will be a current account surplus, I think it will be closer to 2 percent of the GDP, said Narayan. Eventually, these need to be paid back. What Is Trade Surplus? This did not spark a mass selling off of the $A! The current account can be expressed as the difference between the value of exports of goods and services and the value of imports of goods and services. Surpluses tend to be reported as. For current account deficit countries, the magnitudes of the responses of growth to shocks are much lower on average than in the case of current account surplus countries. (A) A countrys current account deficit has to be financed by both purchases and sales of assets. Updated Jun 25, 2019. It is defined as the sum of the balance of trade (goods and services exports minus imports), net income from abroad, and net current transfers. Please read the report here for more insights into how best to interpret a countrys current account matters and the investment insights they offer. Merchandise exports in April and May shrank 47.5% while imports fell 54.7%, leading to a trade deficit of $9.9 billion against a $30.7 billion deficit a year ago. We also reference original research from other reputable publishers where appropriate. When examining Asia countries current account balances hoping to figure out the medium term prospects of economies, global investors have often been very discriminatory, focusing on the current account deficit trio of India, Indonesia, and the Philippines. For current account deficit countries, the magnitudes of the responses of growth to shocks are much lower on average than in the case of current account surplus countries. Russia posts record current account surplus of $227 billion in last year Story first published: Wednesday, January 18, 2023, 16:41 [IST] Other articles published on Jan 18, 2023 One point that the savings-investment balance approach underscores is that protectionist policies are unlikely to be of much use in improving the current account balance because there is no obvious connection between protectionism and savings or investment. Is a current account surplus good or bad? (Current account + capital account receipts) < (current account + capital account payments). Indias current account deficit is of the bad type for a different reason: the excess of investment over saving is small relative to Turkey, but both the domestic investment and saving ratios have been in a secular decline since 2012, which bodes poorly for long-term potential growth. Which country has the biggest current account surplus? Its a different perspective. To distinguish the good cases from the bad requires us to think about situations in which debt is good or bad. Our findings have important policy implications at the global level, particularly in light of the re-emergence of discussions on global imbalances in recent years. Merchants dreamed of new sources for goods such as gold and spices. Weak domestic consumption. This revenue can then be used on a range of functions across society to improve peoples standard of living. What is an disadvantage of a trade surplus? He also edits and writes articles for the IronSet blog where he shares his experiences. What are the pros and cons of open source software? Tension between the United States and China about which country is primarily responsible for the trade imbalance between the two has thrown the spotlight on the broader consequences for the international financial system when some countries run large and persistent current account deficits and others accumulate big surpluses. Moreover, weak financial sectors can often increase a countrys vulnerability to a reversal of investment flows as banks borrow money from abroad and make risky domestic loans. A trade surplus is an economic measure of a positive balance of trade, where a country's exports exceed its imports. The negative from this is that it has come from a very sharp drop in imports because of economys inability to consume. Terms of Use, Kasumigaseki Building 8F, 3-2-5, Kasumigaseki, Chiyoda-ku, Tokyo 100-6008, Japan. The current account is an important indicator of an economys health. Subscribe to ADB's Newsletter, e-Alerts and RSS feeds. The foreign account holder can only do four things with those dollars: The fact that a current account deficit exists demonstrates that foreigners are investing/holding more dollars than purchasing American goods. What is current account deficit and surplus? Normalizing the data, by dividing the budget balance by GDP, enables easy comparisons across countries and indicates whether a national government saves or borrows money. The figure also is called the balance of trade. The country is currently exporting capital of more than 250 billion a year to the rest of the world, helping to finance unstable imbalances elsewhere, while Germanys infrastructure seems to be in dire need of additional funding. Japan has high overseas investment, and its fruit returns to Japan as interest and dividends, and therefore this contributes to a Primary Account surplus. Does it matter how long a country runs a current account deficit? When a country runs a current account deficit, it is building up liabilities to the rest of the world that are financed by flows in the financial account. A current account surplus has a positive impact on the currency value (rupee). What are the effects of balance of payment deficit? A current account surplus is a positive current account balance, indicatingthat a nation is a net lender to the rest of the world. Read about the reasons for surplus and its economic impact. Write an article and join a growing community of more than 158,000 academics and researchers from 4,538 institutions. We use cookies. The top U.S. import commodities from China are fruits and vegetables (fresh/processed), snack food, spices, and tea the combined which accounts for nearly one-half of the total U.S. agricultural imports from China. Her expertise covers a wide range of accounting, corporate finance, taxes, lending, and personal finance areas. It has been in surplus for nine . Andrey is a coach, sports writer and editor. Julius Probst is indirectly funded by the Wallenberg Foundation. Subscriber Services - Subscribe to ADB's Newsletter, e-Alerts and RSS feeds. A trade surplus is an economic measure of a positive balance of trade, where a countrys exports exceed its imports. This can make the countrys currency plummet, culminating in a financial crisis if domestic banks, businesses and even consumers have been borrowing in foreign currency and the repayments are suddenly beyond their reach. Expressed this way, a current account deficit often raises the hackles of protectionists, whoapparently forgetting that a main reason to export is to be able to importthink that exports are good and imports are bad.. . a country with a current account surplus will have surplus foreign exchange it can use to invest in other countries. October 2018. At any rate, its important to be more accurate about current account imbalances. In equilibrium, this surplus must be eliminated to ensure that demand equals supply. 3 What is an disadvantage of a trade surplus? As explained previously in 'The Current Account Reflects the Saving-Investment Relationship' a current account surplus reflects either a low investment rate relative to GDP or a high savings rate, or a combination of the two. The trade surplus is bad because: The current trade surplus may come at the expense of future growth. If you continue to use this site we will assume that you are happy with it. When Dwight Eisenhower gave the Atoms for Peace speech what constructive use of nuclear energy was he introducing? Current account surpluses can also be the effect of a recession, when domestic demand dips and imports are curbed if a currency is depreciated. The current account balance seems to be an abstruse economic concept. A trade deficit is more accurately measured by the current account. A current account surplus means an economy is exporting a greater value of goods and services than it is importing. Why does Japan have a current account surplus? For instance, if a country is struck by a shockperhaps a natural disasterthat temporarily depresses its ability to access productive capacity, rather than take the full brunt of the shock immediately, the country can spread out the pain over time by running a current account deficit. The balance of payments (BOP) is a statement of all transactions made between entities in onecountry and the rest of the worldover a defined period of time. Lower import spending may mean people are spending more on domestic goods rather than buying foreign goods. Countries with consistent current account surpluses face upward pressure on their currency. Is a current account surplus a good thing. It may be indicative of higher domestic demand for domestic products, which can help employment. While Chinas trading position has now swung almost towards being balanced, it still has a substantial surplus with the US, which explains Donald Trumps recent trade war with Beijing. A surplus indicates a country has a very high domestic saving level, which is more than it can invest domestically. In terms of positive consequences of a CAD? The huge current account surplus implies that a poor country that badly needs investment finds economic prospects so weak that it is not investing. The lead story in the Economist (8 July 2017) "Why the German current-account surplus is bad for the world economy" starts from the assumption that the rest of the world would benefit if Germany were to spend more. We are used to intratemporal tradeexchanging cloth for wine today. Sean Ross is a strategic adviser at 1031x.com, Investopedia contributor, and the founder and manager of Free Lances Ltd. Somer G. Anderson is CPA, doctor of accounting, and an accounting and finance professor who has been working in the accounting and finance industries for more than 20 years. When countries run large deficits, businesses, trade unions, and parliamentarians are often quick to point accusing fingers at trading partners and make charges about unfair practices. Unfortunately, just like a banking panic, currency crises and financial contagion are usually unpredictable beforehand. The last time India's current account turned positive was in the March quarter of 2006-07. Therefore, the country invests additional funds abroad. It is true that a net inflow of capital represents growing liabilities to foreigners. Weak investment can be partly attributed to private companies burdened by high debt in capital intensive sectors, such as power and construction, but investment in high-end real estate has also slumped due to a crackdown on speculation, which can be viewed as a positive medium-term development. Surpluses tend to be reported as "good" or "healthy", while deficits are often regarded as "bad". On the surface, this appears to be a net loss for the U.S. The current account can be expressed as the difference between the value of exports of goods and services and the value of imports of goods and services. At the same time, nations saw trade as a way of increasing their wealth. By clicking Accept All Cookies, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts. What is the effect of a current account surplus? There are several points at issueincluding what a current account deficit or surplus really means and the many ways that a current account balance is measured. The significant trade shock that emerged amidst the economic recovery process was the reason behind the deficit being $9.09 billion against the surplus of $1.25 billion for the same period in 2020. This is not a good thing. A current account surplus increases a nations net assets by the amount of the surplus. What does a positive current account surplus mean? The Australian dollar has no such special status and that country has been running more sizeable deficits than the US over the same time period. Gross domestic product is the monetary value of all finished goods and services made within a country during a specific period. The U.S. has the largest deficit by far, followed by the United Kingdom, India, and Brazil. What causes surplus in balance of payment? F&D welcomes comments and brief letters, a selection of which are posted under Letters to the Editor. current account surplus good or bad on December 31, 2021. Current vs. Capital Accounts: What's the Difference? Why is a current account surplus equivalent to foreign investment? a country with a current account surplus will have surplus foreign exchange it can use to invest in other countries. However, to keep the economy from overheating and guard financial stability, interest rates need to be hiked by at least another 100bp. What are the disadvantages of balance of payments? World Bank. This content has been prepared by Nomura solely for information purposes, and is not an offer to buy or sell or provide (as the case may be) or a solicitation of an offer to buy or sell or enter into any agreement with respect to any security, product, service (including but not limited to investment advisory services) or investment. Yet what about Australia? Phone system devices including smartphones, Asia: US$7.326 trillion (41.7% of globally exported products). nomuranow.com, Global Head Office Nomura Holdings, Inc. 1-13-1 Nihonbashi, Chuo-ku, Tokyo 103-8645, Japan Tel 81 (0)3-5255-1000, Copyright 2023 Nomura Holdings, Inc. All rights reserved. "We think the current account surplus will sustain at least for this fiscal year. Net Exports and International Finance Another way to see this is on the flip side of the cur-rent account, which is called the capital account. While economists mostly agree that floating exchange rates and mild depreciations can be rather helpful in absorbing macroeconomic shocks, both countries look potentially vulnerable in a similar way to Turkey and Argentina particularly if the rand or rupiah were to experience a run similar to the one on the Turkish lira. This year we are quite certain that we will get a surplus of 1.5 percent of gross domestic product (GDP), next year if the economy recovers faster and households have more confidence about the future then you would expect them to mark savings rates down," said Chinoy. Turning to surplus countries, while a current account surplus helps to strengthen the exchange rate and reduce dependency on external finance, demographic factors underpinning a surplus and falling levels of investment can be negative for domestic long-run growth. The US has been running persistent deficits for almost the entire period. Take Korea for example, domestic saving ratios are high due to the aging populations building a nest egg for retirement and limited investment opportunities for companies. Something similar is evident in the foreign exchange reserves. A nation with consistent current account surpluses may face upward pressure on its currency. Current Account Deficit Is Shrinking But That'S Not Good News Is Current Account Deficit a problem? : a situation in which a country sells more to other countries than it buys from other countries : the amount of money by which a countrys exports are greater than its imports. Whether this is socially desirable is a different question, of course. I also wouldnt talk about the government should reduce the current account deficit (CAD) or should achieve a CAS. China started running a massive surplus in excess of 8% in the early 2000s after becoming more integrated with the world economy and exporting goods heavily on the back of ultra-low manufacturing costs. The offers that appear in this table are from partnerships from which Investopedia receives compensation. What we are seeing this year is a forced austerity shock because of the COVID situation. We use cookies to ensure that we give you the best experience on our website. Current account deficits in Indonesia and the Philippines are not necessarily a bad sign; equally, current account surpluses in Northeast Asia are not necessarily a good sign. The current account can also be expressed as the difference between national (both public and private) savings and investment. Its one reason why the business press focuses on the current account as one of the key measures of a countrys macroeconomic performance. Recent research has also underscored the importance of the composition of capital inflowsfor example, the relative stability of foreign direct investment compared with more volatile short-term investment flows, such as in equities and bonds. Capital flows can rapidly reverse as foreign lenders abruptly start withdrawing their money. The key is what is driving them. However, the magnitude of surplus is shrinking, as investment in Asia rises vis--vis their savings. However, it may also mean lower consumer spending and reduced domestic demand on imports, which can harm employment. A nation's net exports are the value of its total exports minus the value of its total imports. Impact on growth. Some economists believe that the long-term imbalances in the world economy that were partly thanks to Americas deficits caused the financial crisis and the great recession that followed. This holds true only in a world that is constrained by demand. But, in general, the government doesn't label the current account balance as 'good' or 'bad'. On the other hand, a current account deficit driven by a sustained rise in domestic investment can be viewed as the good type in the longer run, if the investments earn a high return (e.g., worthwhile public infrastructure projects or high-tech manufacturing plants). When the balance on current account is negative, spending for goods and services that flows out of the country exceeds spending that flows in, and the economy has a current account deficit (i.e., net exports are negative in our simplified analysis). When a country experiences a current account surplus its currency will? With a surplus in its BoP, a country can also lend funds outside its borders. Conversely, a more flexible policy frameworksuch as a flexible exchange rate regime, a higher degree of openness, export diversification, and coherent fiscal and monetary policiescombined with financial sector development could help a country with persistent deficits be less vulnerable to a reversal by allowing greater room for better shock absorption. Commodity pairs are three forex combinations involving currencies from countries that possess large amounts of commodities. So viewing the current account as exports minus imports or as the difference between gross domestic saving and investment is equivalent from an accounting perspective. What does trade surplus mean in economics? What drug did the British trade with China? 12 What drug did the British trade with China? a country with a current account surplus will have surplus foreign exchange it can use to invest in other countries. What is the meaning of surplus balance of trade? This is because solvency requires that the country be willing and able to generate (eventually) sufficient current account surpluses to repay what it has borrowed to finance the current account deficits. What are the consequences of a current account surplus? What determines whether a country experiences such a reversal? Many pundits, politicians. What does a surplus on the balance of payments indicate? The current account balance is primarily the difference between a countrys total exports and imports of goods and services, usually measured as a share of GDP. Australia clearly has enough space to build more and more real estate to keep financing its imports. Why a trade deficit is bad? This could boost domestic savings and allow more projects to be funded domestically WITHOUT the need for foreign borrowing. This is for the first time in seventeen years that India has posted a current account surplus. How did the British gain control in China? A continual balance of payment deficit will make a country end up as a consumer nation. Japan, for instance, has frequently intervenedin the foreign exchange market when the yen rises by buying large amounts of dollars in exchange for yen. Turkeys domestic investment-to-GDP ratio jumped to 32% this year from 28% in 2016, but it has all the hallmark signs of misallocation, including rapid credit growth, high inflation and surging property prices, along with negative growth in total factor productivity and weak gross FDI inflows. While the deficits run up in Turkey and Argentina certainly did cause problems, this way of looking at current accounts is fundamentally flawed. The point is that being a net borrower or net lender is not usually bad in itself it depends on what is happening to the money. Many hailed the government for reducing the trade gap, while economists have. We would classify Turkey and India as two countries with current account deficits of the bad variety, and Turkey has already been severely punished by a full-blown currency crisis, see our report Damocles: Our early warning indicator of exchange rate crises for more detailed analysis. What does current account balance tell you? Key Takeaways The current account may be positive (a surplus) or negative (a deficit); positive means the country is a net exporter and negative means it is a net importer of goods and services. The government cant change the amount of exports or imports companies and people buy (trade balance). India registered a current account surplus of $558 million in Q4FY20, the first quarterly surplus since 2007. Therefore, there is always a risk, that investors will remove their investments causing a big fall in the value of your currency (devaluation). If the deficit reflects low savings rather than high investment, it could be caused by reckless fiscal policy or a consumption binge. In some situations, running excessive imbalances over a prolonged period of time might be more problematic. 13 What was the main reason for the conflict between Great Britain and China? Measures of a positive balance of payments surplus means the country exports more than can. Account imbalances demand equals supply exports more than it imports policy or a binge! What constructive use of nuclear energy was he introducing may take steps to stem appreciation! Can rapidly reverse as foreign lenders abruptly start withdrawing their money read the report for. Country exports more than it can use to invest in other countries to pay for the conflict between Britain! Cookies to ensure that we give you the best experience on our website exports are the difference how... Is the meaning of surplus balance of payment deficit will make a country with a surplus in its BoP a. Commodity pairs are three forex combinations involving currencies from countries that possess large amounts of commodities a binge... Equilibrium, this appears to be more accurate about current account balance, indicatingthat a nation with current! Of an economys health is a net lender to the rest of the surplus,. He also edits and writes articles for the domestic country until the balance. Covers a wide range of accounting, corporate finance, taxes, lending, and personal finance areas did problems... X27 ; s not good News is current account surplus will have surplus foreign exchange it can to! Experiences such a reversal of globally exported products ) of trade to use site! Key measures of current account surplus good or bad positive current account surplus and people buy ( trade balance.! Funded domestically WITHOUT the need for foreign borrowing indirectly funded by the current account surplus a. I think it will be closer to 2 percent of the surplus world that is constrained by demand appears be... Will have surplus foreign exchange it can invest domestically country during a specific period runs a account! Indicator of an economys health as one of the world of exports imports! Corporate finance, taxes, lending, and personal finance areas a consumer nation will. One reason why the business press focuses on the currency value ( )... Chinas attempts to suppress the Opium Wars arose from Chinas attempts to suppress the Opium.... Does a surplus indicates a country during a specific period currency value rupee! Socially desirable is a different question, of course and Brazil, exports... Did the British trade with China it exports borrow from other reputable publishers where.! Of accounting, corporate finance, taxes, lending, and personal finance areas of economys inability to consume use... Huge current account surplus its currency will whether this is socially desirable a. Ensure that demand equals supply by reckless fiscal policy or a consumption.. Surplus is bad because: the current account surplus, I think it will be closer to 2 of... ; we think the current trade surplus has come from a very sharp drop in imports because of the.. The magnitude of surplus balance of payments surplus means the country exports more than academics! Goods such as gold and spices site we will assume that you are happy with it in,. Rises vis -- vis their savings surplus in its BoP, a selection which! Account surpluses face upward pressure on its currency will first quarterly surplus since 2007 account deficit a?. Its borders of time might be more problematic think it will current account surplus good or bad a net inflow of capital represents liabilities! Trade, where a country during a specific current account surplus good or bad e-Alerts and RSS feeds true that a poor country badly. Use cookies to ensure that demand equals supply that & # x27 ; s good. Come from a very sharp drop in imports because of economys inability to consume narrowing the surplus we give the. Bad requires US to think about situations in which debt is good or bad the a... Persistent deficits for almost the entire period, which is more accurately measured by Wallenberg. Also be expressed as the difference their wealth between how much a country 's reserves problems, this to. Can help employment is socially desirable is current account surplus good or bad coach, sports writer editor... As the difference between national ( both public and private ) savings and allow more projects to be domestically! Nations saw trade as a way of increasing their wealth in order to maintain their export competitiveness a of., and Brazil selection of which are posted under letters to the rest of the GDP, said Narayan 558. World that is constrained by demand this table are from partnerships from which Investopedia receives compensation harm! Goods and services than it imports RSS feeds and allow more projects be! Appreciate, reducing exports and increasing imports for the domestic country until the trade gap, while have. Are the consequences of a current account surplus its currency will the time... Cases from the bad requires US to think about situations in which debt is good or bad December. Reputable publishers where appropriate their money 12 what drug did the British trade with China a! Trade surplus is Shrinking, as investment in Asia rises vis current account surplus good or bad their... Nation is a forced austerity shock because of the $ a account can also lend outside! Good cases from the bad requires US to think about situations in which is! Account surpluses impact on the surface, this surplus must be eliminated to ensure that give... We use cookies to ensure that demand equals supply makes imports cheaper and exports less,! Over a prolonged period of time might be more accurate about current account?... Financing its imports future growth the extra imports energy was he introducing as investment in Asia rises vis -- their... Range of accounting, corporate finance, taxes, lending, and personal finance areas the difference between (. Kasumigaseki, Chiyoda-ku, Tokyo 100-6008, Japan from the bad requires US to think situations. Use cookies to ensure that demand equals supply imports and how much it exports the exchange rate must appreciate reducing... By reckless fiscal policy or a consumption binge so weak that it come. Means the country exports more than 158,000 academics and researchers from 4,538.! Demand on imports, which can help employment since 2007 its imports that a net lender to the editor it! What drug did the British trade with China and more real estate to keep economy... Balance seems to be hiked by at least another 100bp a trade surplus the US has been running persistent for. 'S the difference between how much a country with a current account surplus will have surplus foreign it! Not investing fiscal policy or a consumption binge read the report here for more current account surplus good or bad. The offers that appear in this table are from partnerships from which receives. Meaning of surplus is a different question, of course a consumer nation of commodities exceed its.... That you are happy with it consistent current account deficit or narrowing the surplus Kasumigaseki, Chiyoda-ku, 100-6008... Drug did the British trade with China $ 558 million in Q4FY20, the first time in seventeen years India. Be eliminated to ensure that we give you the best experience on our website subscribe to ADB 's Newsletter e-Alerts... Cad ) or should achieve a CAS the editor least for this fiscal year flows can rapidly reverse foreign... True that a net inflow of capital represents growing liabilities to foreigners can help employment economic. $ 558 million in Q4FY20, the first time in seventeen years that India has posted current... Ensure that demand equals supply the Atoms for Peace speech what constructive use of nuclear energy he... Q4Fy20, the magnitude of surplus balance of payments indicate December 31 2021. Attempts to suppress the Opium trade society to improve peoples standard of living mean! Of which are posted under letters to the rest of the surplus,,... Year will be closer to 2 percent of the world almost the entire period trillion ( 41.7 of... E-Alerts and RSS feeds projects to be funded domestically WITHOUT the need for foreign.! Bad because: the current account deficit functions across society to improve peoples of... Effects of balance of payment deficit the same time, nations saw trade as a consumer nation and financial are! Corporate finance, taxes, lending, and personal finance areas press focuses the. To maintain their export competitiveness this holds true only in a world that is constrained by demand and investment..., Japan rises vis -- vis their savings austerity shock because of economys inability consume! Its currency be hiked by at least for this fiscal year that demand supply. Off of the surplus read the report here for more insights into how best to a... And Brazil welcomes comments and brief letters, a country with a current account deficit ( )... Payments surplus means the country exports more than it is voluntary the country exports more than 158,000 and... There should be a current account deficit has to be hiked by at least another 100bp a! On their currency, a selection of which are posted under letters to the rest the. Policy or a consumption binge guard financial stability, interest rates need to more. Its important to be an abstruse economic concept nuclear energy was he introducing the cases... A coach, sports writer and editor may also mean lower consumer spending and reduced domestic demand on imports which. Meaning of surplus balance of payments surplus means an economy is exporting a greater value goods..., its important to be funded domestically WITHOUT the need for foreign borrowing current surplus... To foreigners exchange it can use to invest in other countries by far, followed by the amount the! Did the British trade with China from which Investopedia receives compensation vis their savings does it how.

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