Nation’s current account

A country’s balance of payments – its financial situation relative to the world – is made up of the current account and the capital account.

The current account measures the flows of actual goods and services in and out of the country, recording earnings from exports minus expenditure on imports. If a country sells more by value than it buys, it is running a current-account surplus. If the reverse is true, it will have a deficit.

To make up the difference, it will have to sell assets, encourage foreign investment, or increase its foreign debt. In theory, if a country is running a deficit, demand for its currency will fall (and so will its value), making imports more expensive and exports cheaper, balancing things out.


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