What is the Current Account?

What is the Current Account?

The current account records a nation's trade balance, net income from abroad, and transfer payments. A surplus indicates a country exports more than it imports, while a deficit shows the opposite.

Components

• Trade balance: Exports minus imports of goods and services.
• Primary income: Investment income from abroad.
• Secondary income: Transfers such as remittances.
• Services balance: Tourism, financial services, and more.

Using Current Account Data

• Trend analysis: Monitor whether surpluses or deficits are widening.
• Pair selection: Compare countries with contrasting balances.
• Long-term bias: Surplus currencies often have structural tailwinds.
• Combine with capital flows: Evaluate whether deficits are funded by investment inflows.