What is a current account deficit?
The country's current account deficit is equal to net outflow of goods, services, investment income and transfers. The current account of the country may be in balance, deficit or excess at the moment. Whether it is in excess or deficit, the non -zero balance of the current account must be compensated by the same and opposite balance on the capital account. In summary, the current account and capital account are balanced in the area of payments and must always be zero. The current account contains all items of income and expenditure in the national economy: import and export of goods and services, investment income and transfer payments. In the past, the business balance was focused on macroeconomics, while the mercantilist policy was aimed at increasing exports and reducing imports to obtain a trade surplus. The surpluses were considered to be favorable balances of trade, and many countries continue to work on business surpluses and believe they are the best for the economy.
Modern macroeconomists are trying to focus more on the overall balance of the current account, partly because trade deficits are not always bad for the economy, and partly because the transfer of services and investment income has begun to play a more important role in international trade. Services on the current account include things such as foreign travel, transport and financial services. Investment revenues include income for foreign investments or abroad abroad. The balance in the current account is a net balanced and imported goods, plus a net balanced and imported services, plus net investment revenues moving to the country and out of the country, plus net transfers that represent payments that are not in return for goods and services such as foreign aid. Thus, depending on the revenue and expenditure, the current account can either be in excess or deficit - or theoretically in perfect balance.
When a current account is in deficit, the country must find a way to pay for the additional goods and services it purchased. KaThe drinking account consists of all assets between home countries and other countries. In other words, the capital account includes all loans or loans between the country and others. The capital account includes private loans and loans, as well as government loans and loans, through changes in official stakes for abroad or by purchasing and selling government bonds. The key is that the current account deficit must be compensated by a surplus to a capital account, so the international payment balance equals zero.