Balance of payments
Record of financial transactions with the rest of the world; must balance overall.
Balance of payments
Key definitions
Current account
Trade in goods/services, primary income, secondary income.
Financial account
FDI, portfolio flows, other investment, reserves.
Capital account
Capital transfers and non-produced assets.
Visible trade
Trade in goods.
Invisible trade
Trade in services.
Trade deficit
Imports of goods/services exceed exports.
Current account deficit
Overall current account net outflow.
Competitiveness
Ability to sell goods abroad at competitive prices.
Net trade
Exports minus imports (X − M).
Key concepts
Deficit may reflect strong domestic demand, not only weak exports.
See UK trade data.
Relevant tips
- BoP is a macro objective — evaluate whether deficits matter.
Examples & case studies
- Japan case study: surplus does not guarantee high growth.