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Current account

The part of the balance of payments covering trade in goods and services plus income and transfers, and the headline measure of whether a country earns more from the world than it spends.

It is usually quoted as a percentage of GDP so that countries can be compared. Persistent surpluses are associated with creditor economies and, over long periods, with currencies that tend to appreciate in real terms; persistent deficits mean reliance on foreign funding, described under balance-of-payments.

The composition matters as much as the headline. A deficit driven by imported capital equipment is a different proposition from one driven by consumption, and a surplus built on a single commodity export is hostage to terms-of-trade.

Income flows are easy to overlook and can dominate. A country with large foreign assets can run a goods deficit and still post a current account surplus on investment income alone.

Example: a $28bn goods deficit, a $9bn services surplus and $4bn of net income gives a current account of minus $15bn. On a $600bn economy that is 2.5% of GDP that must be financed from abroad every year.

Related: balance-of-payments, capital-account, terms-of-trade, petrocurrency

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