Current Account

Current account is one of the macroeconomic indicators, which is defined as the amount of trade balance (the difference between the export and import of goods and services), the balance of primary and secondary income (from paying and investment), as well as net current transfers (for example, humanitarian aid in the form of goods and services, cash donations, etc.).

This indicator shows the level of economic interaction of the state with other countries for a certain period of time. The current account is published as part of the balance of payments of the country, which is defined as a report that reflects all foreign trade operations of the country with other states for a specific time period.

The current account can be calculated with monthly (for example, in Germany, Turkey, Denmark, France, and Japan), quarterly (in Russia, USA, Austria, Hong Kong, and Switzerland), and annual frequency (for example, in Iraq, Angola, Zimbabwe, UAE, and Bahrain).

The current account is an absolute indicator and can be calculated both in the national currency (in Cambodia, United Kingdom, or Sweden) and in its equivalent in the currency of another country (for example, in Serbia, Kenya, and Egypt, this indicator is taken into account in US dollars).

The balance of the current account may be positive (surplus) or negative (deficit). A positive balance corresponds to the outflow of capital, as national savings are enough to ensure internal investments; they are sent abroad, and the country, in this case, is a lender. A negative balance suggests that the country needs an influx of capital. The current account deficit can be financed either by foreign loans or by selling assets. That is, in the event of a deficit, the country acts as a borrower.

The graph below shows the current account dynamics of various countries from 2016 to the beginning of 2021.



In practice, such an indicator is also often used as a current account to GDP, which is calculated as the ratio of the value of the current account balance to the gross domestic product (GDP) of the country. This indicator is relative and is calculated as a percentage of GDP. It shows the level of international competition. The current account to GDP is usually calculated on an annual basis (for example, in Botswana, Canada, and Japan) and may also be positive (such as in South Africa at the end of 2020) or negative (for example, in the Czech Republic as of state at the end of 2019).

The graph shows the values of current accounts to GDP in different countries for 2016-2021.



In most countries, the balance of the current account is calculated by central banks in absolute and relative terms (for example, in Bulgaria, Mongolia, Jordan, Estonia, and Mexico). At the same time, in a number of countries, these indicators can be considered and published by national statistical authorities (for example, in Sweden, United Kingdom, and Macau).