Thursday, April 26, 2012

Current Account

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The current account records a nation's transactions with the rest of the world—specifically its net trade in goods and services, its net earnings on cross-border investments, and its net transfer payments—over a defined period of time, such as a year or a quarter. 

The current account is one half of the balance of payments, the other half being the capital account. While the capital account measures cross-border investments in financial instruments and changes in central bank reserves, the current account measures imports and exports of goods and services, payments to foreign holders of a country's investments, payments received from investments abroad, and transfers such as foreign aid and remittances. Some countries will split the capital account into two top-level divisions (i.e., the financial account and the capital account). In this context, the financial account measures increases or decreases in international ownership of assets, while the capital account measures financial transactions that do not affect income, production, or savings.

According to Trading Economics, the quarter two 2019 current account of the United States was $-128.2 billion.

Key Points:
  • The current account represents a country's imports and exports of goods and services, payments made to foreign investors, and transfers such as foreign aid.
  • 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.
  • A country's current account balance, whether positive or negative, will be equal but opposite to its capital account balance.
  • The United States has a significant deficit in its current account.
List of countries by current account balance w
List of countries by current account balance as a percentage of GDP w

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