Current account of the balance of payments
Introduced| English | Meaning |
|---|---|
| balance of payments/ˈbæləns ɒv ˈpeɪmənts/ | A record of economic transactions between an economy's residents and the rest of the world over a period. |
| current account/ˈkʌrənt əˈkaʊnt/ | The part of the balance of payments recording trade in goods and services, primary income and secondary income. |
| deficit/ˈdefɪsɪt/ | The amount by which outgoings exceed incomings in a specified budget or account over a period. |
| trade in goods/treɪd ɪn ɡʊdz/ | trade in goods |
| trade in services/treɪd ɪn ˈsɜːvɪsɪz/ | trade in services |
| remittances/rɪˈmɪtənsɪz/ | Money that people working away from home send to households or others in their place of origin. |
| surplus/ˈsɜːpləs/ | An amount by which income or revenue exceeds expenditure over a specified period. |
A country's financial scorecard
- Just as a household tracks money in and out, a country records every transaction with the rest of the world in its balance of payments 国际收支.
- The most-watched part is the current account 经常账户 — and a persistent deficit 赤字 makes headlines.
Current account flow
Track exports, imports and income flows into the current account.
What the current account records
- The current account records trade and income flows with the rest of the world:
- trade in goods 货物贸易 (visible) and trade in services 服务贸易 (invisible),
- primary income (wages, interest, profit from abroad),
- secondary income (transfers like aid and remittances 侨汇).
The current account has four parts: trade in goods, trade in services, primary income and secondary income
A floating exchange rate set by currency demand and supply
Which is part of the current account?
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The current account records trade in goods/services, primary and secondary income.
Match each current-account component to an example.
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Goods + services + primary income + secondary income make up the current account.
Surplus 盈余 and deficit
- A deficit: more money flows out (imports/payments) than in → the value of imports exceeds exports.
- A surplus: more flows in than out.
Worked example. If exports total 500 and imports total 600, the trade balance is 500 − 600 = −100 (a deficit of 100).
Exports total 500 and imports total 600. What is the trade balance (exports − imports)?
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500 − 600 = −100, a trade deficit of 100.
A current account deficit means the value of imports (and other outflows) exceeds exports (and inflows).
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More money flows out than in → a deficit, financed by borrowing or selling assets.
When inflows exceed outflows, the current account is in ______.
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Inflows > outflows → surplus; outflows > inflows → deficit.
Why a deficit matters (or not)
- A large persistent deficit may mean uncompetitiveness or living beyond means, and must be financed by borrowing or selling assets.
- But a deficit can be sustainable if it funds productive investment, or if the financial account offsets it.
You've got it
- the current account = trade in goods + services + primary income + secondary income
- deficit = outflows exceed inflows (imports > exports); surplus = the reverse
- a deficit must be financed; it matters most if large, persistent and unproductive
Write from a goods balance of minus 30
- Exports of goods are 80.
- Imports of goods are 110.
What is the trade-in-goods balance?
Goods exports minus goods imports is the goods balance.
What is the trade-in-goods balance?
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Imports exceed exports by 30.