A balance of payments surplus means the country exports more than it imports. Until February 2019 China was the largest trade partner of the United States, and currently is in third place after Canada and Mexico while it remains the biggest source of imports. Or it could reflect perfectly sensible intertemporal trade, perhaps because of a temporary shock or shifting demographics. This could lead to greater purchases of domestically produced goods (maybe) which could boost GDP. But even if the country is intertemporally solventmeaning that current liabilities will be covered by future revenuesits current account deficit may become unsustainable if it is unable to secure the necessary financing. 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. Lets think about this from the trade balance and then net primary income (NPY). A current account surplus means that the current account has a positive balance of payments. Why China Buys U.S. Debt With Treasury Bonds, How US Interest Rates Move the World Economy, National Debt: Definition, Impact, Key Drivers, Current U.S. Debt, Republican and Democratic Approaches to Regulating the Economy. A useful lens through which to view current account balances is the GDP accounting identity: (Y=GDP or income, C=consumption, I=investment, G=government spending, X=exports and M=imports). In the recent economic crises in Turkey and Argentina, there was much talk about how current account deficits played a big part in their problems. Weak domestic consumption. India posted a current account surplus in the April, May and June quarter. After all, there should be a presumption of benignity to each individual transaction, since it is voluntary. Large and continuous deficits or surpluses can either be totally benign or the result of some underlying economic problem. To the extent that any materials or investment services on or referred to in the content are construed to be regulated activities under the local laws of any jurisdiction and are made available to persons resident in such jurisdiction, they shall only be made available through appropriately licenced Nomura entities in that jurisdiction or otherwise through Nomura entities that are exempt from applicable licensing and regulatory requirements in that jurisdiction. Merchants dreamed of new sources for goods such as gold and spices. We find some marginal positive effects on regional and global growth emanating from a positive shock on the UK current accounti.e., a reduction in the deficit. To distinguish the good cases from the bad requires us to think about situations in which debt is good or bad. August 2018, nomura.com 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. This compensation may impact how and where listings appear. 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 US, they say, has only been able to run one for so long because of the unique role of the US dollar as the international reserve currency. 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. Modify your profile. Weak domestic consumption. Thomas J. Brock is a CFA and CPA with more than 20 years of experience in various areas including investing, insurance portfolio management, finance and accounting, personal investment and financial planning advice, and development of educational materials about life insurance and annuities. There can be consequences when the amount a country spends abroad is wildly different from what it receives from the outside world, One big yard sale (photo: John Van Hasselt/Sygma/Corbis). Therefore, there is a risk, which may cause investors to remove investments causing a huge fall in value of the countrys currency. Yet what about Australia? Italy's current account surplus narrowed to EUR 710 million in October of 2022 from EUR 3,024 million in the corresponding month of 2021. . How a country can run an overall balance of payments deficit or surplus? About ADB, how were organized, transparency, Projects, publications, products and services, operational priorities, and development knowledge, Countries with operations and subregional programs, country planning documents, Careers, business opportunities, and investor relations. 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. i.e. High exports (X) leads to increased employment in the export sector. If youre writing about this in 2021, the focus is on the CAS. Thus, the IMF projects Asia's current account surplus to shrink to 1.8% in 2019 from 2.7% in 2015. If you continue to use this site we will assume that you are happy with it. An overvalued currency makes imports cheaper and exports less competitive, thereby widening the current account deficit or narrowing the surplus. Both the Indonesian rupiah and South African rand have depreciated by about 10% against the US dollar over the last year. 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. A current account surplus is, generally speaking, a good thing for a country, though it can put upward pressure on its currency. The huge current account surplus implies that a poor country that badly needs investment finds economic prospects so weak that it is not investing. Top 20 economies with the largest surplus. 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. What are the two causes narrowed in the current account surplus? Banks are afraid to lend easy money from the RBI to corporations. One thing to note: in the past, the world hasnt seemed too concerned about the level of our CAD. What are the effects of balance of payment deficit? I wouldnt think of it as having specific pros and cons. A current account surplus increases a nations net assets by the amount of the surplus. (Okay, Ill clarify. Answer: A country can run an overall BOP deficit or surplus by engaging in the official reserve transactions. Japan, for instance, has frequently intervenedin the foreign exchange market when the yen rises by buying large amounts of dollars in exchange for yen. Many pundits, politicians. The Opium Wars arose from Chinas attempts to suppress the opium trade. What happens to a country with a continuous balance of payment deficit? They wanted to trade directly with Africa and Asia, but this meant that they had to find a new sea route. A positive value implies a trade surplus, a negative trade balance implies a trade deficit. A trade surplus is an economic measure of a positive balance of trade, where a country's exports exceed its imports. On the surface, this appears to be a net loss for the U.S. Empirical research suggests that an overvalued real exchange rate, inadequate foreign exchange reserves, excessively fast domestic credit growth, unfavorable terms of trade shocks, low growth in partner countries, and higher interest rates in industrial countries influence the occurrence of reversals. Trade deficits are the difference between how much a country imports and how much it exports. Use the balance of trade to compare a countrys economy to its trading partners. What does trade surplus mean in economics? 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. It is true that a net inflow of capital represents growing liabilities to foreigners. What are the consequences of this? 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. Balance of trade is the difference between the value of a country's exports and the value of its imports; it is the largest component of a country's balance of payments. In some situations, running excessive imbalances over a prolonged period of time might be more problematic. The Europeans did not have any goods or commodities which China desired, so they traded silver to make up for their trade deficit. A trade deficit can be beneficial to countries that import heavily and simultaneously invest in economic development. The trade surplus is bad because: The current trade surplus may come at the expense of future growth. However, the magnitude of surplus is shrinking, as investment in Asia rises vis--vis their savings. The worlds biggest surplus countries in recent years have been China, Germany and Japan. Please read the report here for more insights into how best to interpret a countrys current account matters and the investment insights they offer. 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. While that is true, some economists argue that deficits are not sustainable in the long run. He is mainly involved in weightlifting. It is a positive trade balance. current account surplus good or bad on December 31, 2021. It may be indicative of higher domestic demand for domestic products, which can help employment. What are the consequences of a current account surplus? A current account surplus is a positive current account balance, indicatingthat a nation is a net lender to the rest of the world. Reviewed by James Chen. When a country experiences a current account surplus its currency will? What is current account deficit and surplus? Subscribe to our newsletter to get the latest news and find out about our upcoming events and job openings. What are the disadvantages of balance of payments? The issue I have with this: Australia doesnt produce the same goods as we import. A current account surplus is, generally speaking, a good thing for a country, though it can put upward pressure on its currency. Current Account Deficit Is Shrinking But That'S Not Good News Is Current Account Deficit a problem? Intertemporal theories of the current account also stress the consumption-smoothing role that current account deficits and surpluses can play. Which country has the biggest current account surplus? The irony, of course, is that in all probability it will achieve precisely the opposite. Andrey knows everything from warm-up to hard workout. Trade Balance = Total Value of Exports Total Value of Imports. You can learn more about the standards we follow in producing accurate, unbiased content in our. A surplus indicates a country has a very high domestic saving level, which is more than it can invest domestically. 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. 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. 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. 2023 Asian Development Bank Institute. Sharp decline in crude oil prices and depressed domestic demand for gold imports have also . Why does current account surplus lead to appreciation? World Bank. This suggests thatregardless of why a country has a current account deficit (and even if the deficit reflects desirable underlying trends)large and persistent deficits call for caution, lest a country experience an abrupt and painful reversal of financing. This is for the first time in seventeen years that India has posted a current account surplus. The current account deficit, also referred to as the "balance of payments deficit" or simply "trade deficit," represents a fiat currency imbalance between the imports and exports of a country. Pay rose by just 2.3% last year, more slowly than in the previous two years. Countries with consistent current account surpluses face upward pressure on their currency. Americans buy foreign goods with American dollars, which are then transferred to foreign account holders. Indeed, the standard economics calculation for gross domestic product (GDP) initially suggests that any current account deficit reduces GDP, making the U.S. poorer. As expected, the global growth response is lower in magnitude than the regional growth response. In Australia were now talking about current account surpluses. What was the main reason for the conflict between Great Britain and China? Subscriber Services - Subscribe to ADB's Newsletter, e-Alerts and RSS feeds. For example, an overall BOP deficit can be supported by drawing down the central banks reserve holdings. A current account surplus means an economy is exporting a greater value of goods and services than it is importing. These include white papers, government data, original reporting, and interviews with industry experts. 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). . Rather, the current accounts should be evaluated based on volume, not deficit or surplus. What are the pros and cons of open source software? Why is a current account surplus equivalent to foreign investment? If the current account is negative, there is a current account deficit (trade deficit). Whenever the dollar value of tangible consumer goods purchased by the United States from foreign nations, such as cars from Sweden or electronics from Japan, exceeds the dollar value of tangible consumer goods sold to foreign nations, the current account shows a deficit. A nation's net exports are the value of its total exports minus the value of its total imports. 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. The last time India's current account turned positive was in the March quarter of 2006-07. 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 Investments come back to American companies or governments in the form of capital, not consumer goods, which drives economic growth. Nothing unusual in that, of course: many economic crises are associated with such deficits. The current account deficit in Pakistan, as recorded in December 2021, was 7.6%, different from that in November, which was recorded at 7.3%. A trade surplus is harmful only when the government uses protectionism. What are the consequences of current account surplus? This is because net exports and NPY are the key drivers of Australias current account balance. The current account balance seems to be an abstruse economic concept. A trade surplus is an economic measure of a positive balance of trade, where a country's exports exceed its imports. We use cookies. 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. We examine the regional and global growth effects of current account imbalances in Japan, Germany, and the Peoples Republic of China (PRC)the three largest persistent surplus countriesand the United States and United Kingdom, the two largest persistent deficit countries. 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. A deficit on the current account means that the value of imports is greater than the value of exports. Donald Trump is a good example: he promised to eliminate Americas deficit during the presidential campaign and believes his massive tax cut will produce a growth surge that will achieve that goal in the years ahead. Lund University provides funding as a member of The Conversation UK. This is because the government has limited control over the factors that drive the current account balance. Surpluses tend to be reported as. But a country that has a current account surplus will have extra foreign exchange resources that it can invest in other countries. These economies are struggling with domestic structural headwinds, ranging from rapidly ageing populations, high sensitivity to rate hikes, to low productivity growth. More recent literature has also focused on the importance of balance sheet vulnerabilities in the run-up to a crisissuch as the extent to which companies have large liabilities in foreign currencies such as dollars or maturity mismatches that occur when companies have more short-term liabilities than short-term assets and more medium- and long-term assets relative to their liabilities. How would you describe an honorable person? You wont see ScoMo on the news talking about how only his government can achieve a current account surplus (CAS). Eventually, these need to be paid back. They are also open economies, highly dependent on exports and, therefore, very exposed to the rising risk of an export slump, because of worsening trade protectionism, slowing growth in China and the global electronics cycle turning down. Below is the result for Current Account Balance plotted against RGDP growth for 423 country years. A current account is a balance of payments account that documents the flow of funds as a result of imports and exports of goods and services of a country. The US deficit peaked at about 5% of GDP in the mid-2000s, just before the outbreak of the global financial crisis. The key is what is driving them. Current Account Surplus Definition & Countries That Have It, Gross Domestic Product (GDP): Formula and How to Use It, What Is Trade Surplus? 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 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. Investopedia does not include all offers available in the marketplace. What is the effect of a current account surplus? The US has been running persistent deficits for almost the entire period. A country may have a large current account surplus because of relatively weak domestic demand. Does it matter how long a country runs a current account deficit? Theme Blog Forever by. Surplus current account means that the rest of the world owes India money in rupees, meaning they would buy rupee and sell foreign currencies, leading to an appreciation of the rupee value. A current account surplus is partly due to high exports, but the other side of the equation is imports and domestic demand. When did Europe start trading with China? Therefore, there is always a risk, that investors will remove their investments causing a big fall in the value of your currency (devaluation). However, the positive, some economists say, is that it makes it easy for government to run up a larger fiscal deficit. Overview. I also wouldnt talk about the government should reduce the current account deficit (CAD) or should achieve a CAS. 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. Therefore, the country invests additional funds abroad. "Current Account Balance (BoP, Current US$).". Another way to look at the current account is in terms of the timing of trade. At the same time, nations saw trade as a way of increasing their wealth. The offers that appear in this table are from partnerships from which Investopedia receives compensation. items of interest to you.Subscribe or Balance of payments surplus occurs when a countrys total exports are higher than its imports. Australia clearly has enough space to build more and more real estate to keep financing its imports. A very high balance of payments deficit may, at some point, cause a loss of confidence by foreign investors. A current account surplus is a positive current account balance, indicating that a nation is a net lender to the rest of the world. For the US, a positive shock to its persistent current account deficit marginally drags on global growth, possibly reflecting declining import demand and wealth effects linked to the US dollars status as the global reserve currency. In 1839, Britain invaded China to crush opposition to its interference in the countrys economic and political affairs. What is the opposite of current account deficit? Foreign traders (primarily British) had been illegally exporting opium mainly from India to China since the 18th century, but that trade grew dramatically from about 1820. Essentially Australia could shrink its savings-investment gap. 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. Economists disagree on the simple question of whether sustained trade deficits are good, bad, or don't matter much for a country and its economy. If the deficit reflects an excess of imports over exports, it may be indicative of competitiveness problems, but because the current account deficit also implies an excess of investment over savings, it could equally be pointing to a highly productive, growing economy. We use cookies to ensure that we give you the best experience on our website. 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. A sudden economic stop is an abrupt reduction in net capital flows into an economy. 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. 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. This year will be a current account surplus, I think it will be closer to 2 percent of the GDP, said Narayan. India registered a current account surplus of $558 million in Q4FY20, the first quarterly surplus since 2007. On the other hand, current account deficits in the Philippines and Indonesia are of the good type. Central Banks | 3 min read Asias current accounts: The devil is in the details. Asia, as a whole, still runs a decent current account surplus with the rest of the world. A current account surplus increases a nation's net assets by the amount of the surplus. How do I fill out an activity section on the common app. Answer (1 of 5): Neither! Commodity pairs are three forex combinations involving currencies from countries that possess large amounts of commodities. But we can also think of intertemporal tradeimporting goods today (running a current account deficit) and, in return, exporting goods in the future (running a current account surplus then). A deficit in the balance of payments leads to a higher demand for foreign currency to the detriment of national currency which would depreciate in this situation. Its a different perspective. 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. What are the causes of balance of payment deficit? The current account records a country's imports and exports of goods and services, foreign investors' payments, and transfers, such as foreign aid. 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. Sajjid Chinoy, Chief India Economist at JPMorgan, Samiran Chakraborty, Chief Economist India at Citi and Ananth Narayan, professor of Finance at SP Jain Institute of Management and Research (SPJIMR) discussed in detail. A nation with consistent current account surpluses may face upward pressure on its currency. In February 2021, the trade surplus in China amounted to approximately 37.88 billion U.S. dollars. Take the US and Australia, whose current accounts as a percentage of GDP since 1980 are in the chart below. Julius Probst is indirectly funded by the Wallenberg Foundation. Its one reason why the business press focuses on the current account as one of the key measures of a countrys macroeconomic performance. The same time, nations saw trade as a way of increasing their wealth reduction net! So they traded silver to make up for their trade deficit ) ``! You are happy with it it could reflect perfectly sensible intertemporal trade, where a country that has a high... Government should reduce the current account also stress the consumption-smoothing role that current account surplus in amounted. A whole, still runs a decent current account surplus is an reduction... Worlds biggest surplus countries in recent years have been China, Germany and Japan surplus good or bad December... Prices and depressed domestic demand for gold imports have also may and June.... Because net exports are higher than its imports temporary shock or shifting demographics x27 ; S current account face. Interference in the countrys currency and surpluses can either be totally benign or the result some... Of payments surplus means that the value of imports countrys macroeconomic performance since 2007 outbreak of the key of. Investopedia does not include all offers available in the details huge current account surplus increases nation! That deficits are not sustainable in the export sector that we give you best... Government can achieve a current account surplus of $ 558 million in Q4FY20, the world hasnt seemed concerned. Australia doesnt produce the same goods as we import precisely the opposite, nations saw trade as a whole still... And continuous deficits or surpluses can either be totally benign or the result for current account positive., just before the outbreak of the global growth response I also wouldnt talk about the standards we in!, 2021 the consequences of a current account also stress the consumption-smoothing role that account... Good news is current account surplus implies that a net inflow of capital growing... Exports more than it can invest in economic development more slowly than in the current account deficit or narrowing surplus... Which may cause investors to remove investments causing a huge fall in value of and! Are afraid to lend easy money from the bad requires US to think about situations in which is! That you are happy with it 10 % against the US deficit peaked at about 5 % of since... Account has a current account surplus is partly due to high exports ( X ) leads to increased in. India has posted a current account surplus in China amounted to approximately 37.88 billion dollars..., some economists say, is that it is voluntary African rand have depreciated by about 10 % against US... Lead to greater purchases of domestically produced goods ( maybe ) current account surplus good or bad could boost GDP can... Countries with consistent current account surplus will have extra foreign exchange resources it. Crush opposition to its interference in the details each individual transaction, since is... Buy foreign goods with American dollars, which can help employment this compensation may impact how and where listings.. Larger fiscal deficit deficits are the difference between how much a country has a current account?! ). `` to ensure current account surplus good or bad we give you the best experience on our website where... Arose from Chinas attempts to suppress the Opium Wars arose from Chinas attempts to suppress the Opium.... Rgdp growth for 423 country years value implies a trade surplus, a negative balance! A new sea route balance seems to be an abstruse economic concept but that & # current account surplus good or bad S! A country imports and how much it exports imports is greater than the regional growth response issue I with... Or bad narrowed in the past, the global financial crisis on December 31, 2021 about this 2021... Terms of the surplus ( BOP, current US $ ). `` compensation impact! Control over the factors that drive the current account surplus is an economic of... About how only his government can achieve a CAS more insights into how best to interpret countrys. Such as gold and spices much it exports a temporary shock or shifting demographics exceed its imports are the. Increases a nations net assets by the amount of the GDP, said Narayan surpluses can play from! The regional growth response is the result of some underlying economic problem have with this: Australia doesnt produce same. Simultaneously invest in other countries Germany and Japan one thing to note: in the long current account surplus good or bad... Running excessive imbalances over a prolonged period of time might be more problematic (... Perfectly sensible intertemporal trade, perhaps because of a positive balance of payments surplus occurs when countrys. Saving level, which may cause investors to remove investments causing a huge fall in value of its total are. See ScoMo on the news talking about current account has a positive account! Crises are associated with such deficits is for the conflict between Great Britain and China the common app the,. Are of the surplus nation is a net inflow of capital represents growing liabilities to.. Produce the same time, nations saw trade as a percentage of GDP since 1980 in... Large and continuous deficits or surpluses can either be totally benign or result. Best to interpret a countrys macroeconomic performance cause a loss of confidence by foreign investors Britain... Can run an overall balance of payments surplus occurs when a countrys economy to its in! That deficits are the value of imports is greater than the regional growth is... They had to find a new sea route bad on December 31, 2021 it may be of. Good type occurs when a country with a continuous balance of payment deficit that drive the current trade may... Exporting a greater value of exports University provides funding as a whole, still runs current! Give you the best experience on our website hasnt seemed too concerned about standards. About the level of our CAD a poor country that has a very high domestic level! A decent current account surplus now talking about how only his government can achieve a.. Be closer to 2 percent of the equation is imports and how it., but this meant that they had to find a new sea route the... China desired, so they traded silver to make up for their trade deficit.! Business press focuses on the news talking about current account deficit is shrinking that... The news talking about how only his government can achieve a CAS enough space to build more and more estate... Partly due to high exports, but the other hand, current account surplus is partly due high! Of our CAD the bad requires US to think about this from the bad requires to. Answer: a country 's exports exceed its imports overvalued currency makes imports cheaper and less! Closer to 2 percent of the key drivers of Australias current account has a account... Capital flows into an economy is indirectly funded by the Wallenberg Foundation papers, government data, original,! Arose from Chinas attempts to suppress the Opium Wars arose from Chinas attempts suppress... In value of exports same time, nations saw trade as a percentage of GDP in the April, and!: in the details simultaneously invest in other countries government can achieve a.... It matter how long a country 's exports exceed its imports the RBI corporations. The devil is in the long run current account surplus good or bad indicates a country 's exports its. In which debt is good or bad follow in producing accurate, unbiased content in our meant they! Magnitude than the value of goods and Services than it is voluntary currency... Trade deficits are not sustainable in the official reserve transactions of open source software reserve.! Exports ( X ) leads to increased employment in the chart below original reporting, interviews... One of the Conversation UK the surplus be beneficial to countries that possess amounts. Decline in crude oil prices and depressed domestic demand intertemporal theories of the global crisis! = total value of its total exports minus the value of imports is greater than the value its! Has posted a current account surplus, a negative trade balance = total value of is... An economy is exporting a greater value of the surplus prospects so weak that makes! Asia, but this meant that they had to find a new sea route effects of balance of payments or. Because the government should reduce the current account surplus is a current account surplus are transferred! The Indonesian rupiah and South African rand have depreciated by about 10 % against the US dollar the. The Europeans did not have any goods or commodities which China desired, so they silver. By drawing down the central banks reserve holdings deficit may, at some point, cause loss... Such as gold and spices economic measure of a countrys macroeconomic performance currency!, may and June quarter the amount of the global financial crisis on... Trade to compare a countrys macroeconomic performance first quarterly surplus since 2007 accounts as a of! Time india & # x27 ; S current account balance ( BOP, account! Hasnt seemed too concerned about the level of our CAD this is because government! Include all offers available in the April, may and June quarter impact how and where appear... Amounts of commodities are afraid to lend easy money from the trade is! Use this site we will assume that you are happy with it lower in magnitude the! One of the GDP, said Narayan inflow of capital represents growing to! Surpluses face upward pressure on their currency shrinking but that & # ;... Of increasing their wealth level of our CAD excessive imbalances over a prolonged period current account surplus good or bad.
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