Definition
- Current account balance
- The current account balance is a broad measure of a country's trade that includes goods and services as well as international flows of income and transfers.
- Not to be confused with: Balance of trade
- The balance of trade is the gap, if any, between the value of a nation's exports and its imports.
Example
Can you work out a current account balance from its four parts?
In one quarter the UK exports £90bn of goods and imports £120bn, a deficit of £30bn. It exports £60bn of services and imports £35bn, a surplus of £25bn. Income is £40bn in and £45bn out, and transfers £3bn in and £8bn out. The current account is −30 + 25 − 5 − 5 = −£15bn, a deficit.
Test yourself
What is the difference between current account balance and balance of trade?
The balance of trade covers exports and imports only; the current account adds income and transfers.