Current Account Balance
The current account balance measures a country’s net trade in goods and services plus net income and transfers from abroad.
Meaning in Practice
The current account includes the trade balance, net investment income, and current transfers such as remittances. It reflects a nation’s transactions with the rest of the world over a specific period. A surplus indicates that exports and income exceed imports and payments.
Why It Matters
The current account includes the trade balance, net investment income, and current transfers such as remittances. It reflects a nation’s transactions with the rest of the world over a specific period. A surplus indicates that exports and income exceed imports and payments.
Market Impact
A widening deficit can pressure the domestic currency and increase external vulnerability concerns. A surplus may support currency appreciation and investor confidence. Bond markets may react to changes in external financing needs.
Example
If a country exports more goods and services than it imports and receives net income from abroad, it records a current account surplus.