Current account

In economics, a country's current account is one of the two components of its balance of payments, the other being the capital account (also known as the financial account). The current account consists of the balance of trade, net primary income or factor income (earnings on foreign investments minus payments made to foreign investors) and net cash transfers, that have taken place over a given period of time. The current account balance is one of two major measures of a country's foreign trade (the other being the net capital outflow). A current account surplus indicates that the value of a country's net foreign assets (i.e. assets less liabilities) grew over the period in question, and a current account deficit indicates that it shrank. Both government and private payments are included in the calculation. It is called the current account because goods and services are generally consumed in the current period.[1][2]

Cumulative Current Account Balance
Cumulative Current Account Balance 1980–2008 (US$ billions) based on the International Monetary Fund data

Overview

The current account is an important indicator of an economy's health. It is defined as the sum of the balance of trade (goods and services exports minus imports), net income from abroad, and net current transfers. A positive current account balance indicates the nation is a net lender to the rest of the world, while a negative current account balance indicates that it is a net borrower from the rest of the world. A current account surplus increases a nation's net foreign assets by the amount of the surplus, and a current account deficit decreases it by that amount.

A country's balance of trade is the net or difference between the country's exports of goods and services and its imports of goods and services, excluding all financial transfers, investments and other components, over a given period of time. A country is said to have a trade surplus if its exports exceed its imports, and a trade deficit if its imports exceed its exports.

Positive net sales abroad generally contribute to a current account surplus; negative net sales abroad generally contribute to a current account deficit. Because exports generate positive net sales, and because the trade balance is typically the largest component of the current account, a current account surplus is usually associated with positive net exports.

In the net factor income or income account, income payments are outflows, and income receipts are inflows. Income are receipts from investments made abroad (note: investments are recorded in the capital account but income from investments is recorded in the current account) and money sent by individuals working abroad, known as remittances, to their families back home. If the income account is negative, the country is paying more than it is taking in interest, dividends, etc.

The various subcategories in the income account are linked to specific respective subcategories in the capital account, as income is often composed of factor payments from the ownership of capital (assets) or the negative capital (debts) abroad. From the capital account, economists and central banks determine implied rates of return on the different types of capital. The United States, for example, gleans a substantially larger rate of return from foreign capital than foreigners do from owning United States capital.

In the traditional accounting of balance of payments, the current account equals the change in net foreign assets. A current account deficit implies a reduction of net foreign assets:

Current account = change in net foreign assets.

If an economy is running a current account deficit, it is absorbing (absorption = domestic consumption + investment + government spending) more than that it is producing. This can only happen if some other economies are lending their savings to it (in the form of debt to or direct/ portfolio investment in the economy) or the economy is running down its foreign assets such as official foreign currency reserve.

On the other hand, if an economy is running a current account surplus it is absorbing less than that it is producing. This means it is saving. As the economy is open, this saving is being invested abroad and thus foreign assets are being created.

Calculation

US Current Account Balance 2017 Computation
US current account calculation for 2017.[3]

Normally, the current account is calculated by adding up the 4 components of current account: goods, services, income and current transfers.[4]

Goods
Being movable and physical in nature, goods are often traded by countries all over the world. When a transaction of certain good's ownership from a local country to a foreign country takes place, this is called an "export". The other way around, when a good's owner changes to a local inhabitant from a foreigner, is defined to be an "import". In calculating current account, exports are marked as credit (the inflow of money) and imports as debit (the outflow of money).
Services
When an intangible service (e.g. tourism) is used by a foreigner in a local land and the local resident receives the money from a foreigner, this is also counted as an export, thus a credit.
Income
A credit of income happens when an individual or a company of domestic nationality receives money from a company or individual with foreign identity. A foreign company's investment upon a domestic company or a local government is considered as a debit.
Current transfers
Current transfers take place when a certain foreign country simply provides currency to another country with nothing received as a return. Typically, such transfers are done in the form of donations, aids, or official assistance.

A country's current account can be calculated by the following formula:

Where CA is the current account, X and M are respectively the export and import of goods and services, NY the net income from abroad, and NCT the net current transfers.

Reducing current account deficits

ABS-5302.0-BalancePaymentsInternationalInvestmentPositionAustralia-BalancePaymentsSummary-Original Quarter-CurrentAccount-A3533808F
The quarterly current account of Australia ($AU million) since 1959

A nation's current account balance is influenced by numerous factors – its trade policies, exchange rate, competitiveness, forex reserves, inflation rate and others. Since the trade balance (exports minus imports) is generally the biggest determinant of the current account surplus or deficit, the current account balance often displays a cyclical trend. During a strong economic expansion, import volumes typically surge; if exports are unable to grow at the same rate, the current account deficit will widen. Conversely, during a recession, the current account deficit will shrink if imports decline and exports increase to stronger economies. The currency exchange rate exerts a significant influence on the trade balance, and by extension, on the current account. An overvalued currency makes imports cheaper and exports less competitive, thereby widening the current account deficit (or narrowing the surplus). An undervalued currency, on the other hand, boosts exports and makes imports more expensive, thus increasing the current account surplus (or narrowing the deficit). Nations with chronic current account deficits often come under increased investor scrutiny during periods of heightened uncertainty. The currencies of such nations often come under speculative attack during such times. This creates a vicious circle where precious foreign exchange reserves are depleted to support the domestic currency, and this forex reserve depletion – combined with a deteriorating trade balance – puts further pressure on the currency. Embattled nations are often forced to take stringent measures to support the currency, such as raising interest rates and curbing currency outflows.

Action to reduce a substantial current account deficit usually involves increasing exports (goods going out of a country and entering abroad countries) or decreasing imports (goods coming from a foreign country into a country). Firstly, this is generally accomplished directly through import restrictions, quotas, or duties (though these may indirectly limit exports as well), or by promoting exports (through subsidies, custom duty exemptions etc.). Influencing the exchange rate to make exports cheaper for foreign buyers will indirectly increase the balance of payments. Also, currency wars, a phenomenon evident in post recessionary markets is a protectionist policy, whereby countries devalue their currencies to ensure export competitiveness. Secondly, adjusting government spending to favor domestic suppliers is also effective.

Less obvious methods to reduce a current account deficit include measures that increase domestic savings (or reduced domestic borrowing), including a reduction in borrowing by the national government.

A current account deficit is not always a problem. The Pitchford thesis states that a current account deficit does not matter if it is driven by the private sector. It is also known as the "consenting adults" view of the current account, as it holds that deficits are not a problem if they result from private sector agents engaging in mutually beneficial trade. A current account deficit creates an obligation of repayments of foreign capital, and that capital consists of many individual transactions. Pitchford asserts that since each of these transactions were individually considered financially sound when they were made, their aggregate effect (the current account deficit) is also sound.

A deficit implies we import more goods and services than we export.

To be more precise, the current account equals: Trade in goods (visible balance) Trade in services (Invisible balance) e.g. insurance and services Investment incomes e.g. dividends, interest and migrants remittances from abroad Net transfers – e.g. International aid The current account is essentially exports – imports (+net international investment balance)

If one has a current account deficit, in a floating exchange rate this must be balanced by a surplus on the financial / capital account.

Interrelationships in the balance of payments

The balance of payments (BOP) is the place where countries record their monetary transactions with the rest of the world. Transactions are either marked as a credit or a debit. Within the BOP there are three separate categories under which different transactions are categorized: the current account, the capital account and the financial account. In the current account, goods, services, income and current transfers are recorded. In the capital account, physical assets such as a building or a factory are recorded. And in the financial account, assets pertaining to international monetary flows of, for example, business or portfolio investments are noted.

Absent changes in official reserves, the current account is the mirror image of the sum of the capital and financial accounts. One might then ask: Is the current account driven by the capital and financial accounts or is it vice versa? The traditional response is that the current account is the main causal factor, with capital and financial accounts simply reflecting financing of a deficit or investment of funds arising as a result of a surplus. However, more recently some observers have suggested that the opposite causal relationship may be important in some cases. In particular, it has controversially been suggested that the United States current account deficit is driven by the desire of international investors to acquire US assets (see Ben Bernanke,[5] William Poole links below). However, the main viewpoint undoubtedly remains that the causative factor is the current account and that the positive financial account reflects the need to finance the country's current account deficit.

Current account surpluses are facing current account deficits of other countries, the indebtedness of which towards abroad therefore increases. According to Balances Mechanics by Wolfgang Stützel this is described as surplus of expenses over the revenues. Increasing imbalances in foreign trade are critically discussed as a possible cause of the financial crisis since 2007.[6] The existing differences between the current accounts in the eurozone is considered to be the root cause of the Euro crisis by many Keynesian economists, such as Yanis Varoufakis, Heiner Flassbeck,[7] Paul Krugman[8] and Joseph Stiglitz.[9]

U.S. account deficits

Since 1989, the current account deficit of the US has been increasingly large, reaching close to 7% of the GDP in 2006. In 2011, it was the highest deficit in the world.[10] New evidence, however, suggests that the US current account deficits are being mitigated by positive valuation effects.[11] That is, the US assets overseas are gaining in value relative to the domestic assets held by foreign investors. The net foreign assets of the US are therefore not deteriorating one to one with the current account deficits. The most recent experience has reversed this positive valuation effect, however, with the US net foreign asset position deteriorating by more than two trillion dollars in 2008, down to less than $18 trillion, but has since risen to $25 trillion.[12] This temporary decline was due primarily to the relative under-performance of domestic ownership of foreign assets (largely foreign equities) compared to foreign ownership of domestic assets (largely US treasuries and bonds).[13]

OECD quarterly international trade statistics

The Organisation for Economic Co-operation and Development, OECD – an international economic organisation of 34 countries, founded in 1961 to "promote policies that will improve the economic and social well-being of people around the world"[14] – produces quarterly reports on its 34 member nations comparing statistics on balance of payments and international trade in terms of current account balance in billions of US dollars and as a percentage of GDP.[15]

For example, according to their report the current account balance in billions of US dollars of several countries can be compared,

  • Australia for 2013 was −51.39 and 2014 was −43.69, with each quarter between 2013 Q1 through 2015 Q2 ranging from a low of −14.81 in Q2 2015 to a high of −8.53 in Q1 2014. Australia's current account balance in Q2 2015 was up down to −14.81. The current balance in Q2 as a percentage of GDP was −4.7%.
  • Canada for 2013 was −54.62, and 2014 was −37.46 with each quarter between 2013 Q1 through 2015 Q2 ranging from a low of −14.63 in Q1 2015 to a high of −8.28 in Q3 2014. Canada's current account balance in Q2 2015 was up at −14.15. The current balance in Q2 as a percentage of GDP was −3.5%.
  • China for 2013 was 148.33, and 2014 was 219.90 with each quarter between 2013 Q1 through 2015 Q2 ranging from a low of 31.96 in Q4 2014 to a high of 75.58 in Q4 2013. The United States' current account balance in Q2 2015 was down to 73.03. The current balance in 2013 as a percentage of GDP was 1.6%.
  • Germany for 2013 was 238.61, and 2014 was 285.82 with each quarter between 2013 Q1 through 2015 Q2 ranging from a low of 54.13 in Q3 2013 to a high of 68.89 in Q1 2014. Germany's current account balance in Q2 2015 was up to 68.39. The current balance in Q2 as a percentage of GDP was 8.2%.
  • Greece for 2013 was −4.89, and 2014 was −5.00 with each quarter between 2013 Q1 through 2015 Q2 ranging from a low of −2.76 in Q1 2013 to a high of 0.01 in Q2 2015. Greece's current account balance in Q2 2015 was up to 0.01. The current balance in Q2 as a percentage of GDP was 0.0.
  • The United States for 2013 was −376.76, and for 2014 was −389.53 with each quarter between 2013 Q1 through 2015 Q2 ranging from a low of −118.30 in Q1 2013 to a high of −81.63 in Q4 2013. The United States' current account balance in Q2 2015 was up to −109.68. The current balance in Q2 as a percentage of GDP was −2.4%.

The report also compares countries on services balance, exports of services, import of services, goods balance, export of goods and imports of goods in billions of US dollars.[15]

World Factbook data

The World Factbook,[16] a reference resource produced by the Central Intelligence Agency that collects data and publishes online open reports comparing the current account balance of countries.[17] According to World Factbook, "[c]urrent account balance compares a country's net trade in goods and services, plus net earnings, and net transfer payments to and from the rest of the world during the period specified. These figures are calculated on an exchange rate basis."[17] The top ten on their list of countries by current account balance in 2014 were:

  1. Germany: $286,400,000,000
  2. China: $219,700,000,000
  3. Netherlands: $90,160,000,000
  4. South Korea: $89,220,000,000
  5. Saudi Arabia: $76,920,000,000
  6. Taiwan: $65,420,000,000
  7. Russia: $59,460,000,000
  8. Singapore: $58,770,000,000
  9. Qatar: $54,840,000,000
  10. United Arab Emirates: $54,630,000,000[17]

On the same list the bottom ten countries by current account balance in 2014 were

185. Mexico: −$24,980,000,000
186. Indonesia: −$26,230,000,000
187. France: −$26,240,000,000
188. India: −$27,530,000,000
189. European Union: −$34,490,000,000 (2011 est)
190. Canada: −$37,500,000,000
191. Australia: −$43,750,000,000
192. Turkey: −$46,530,000,000
193. Brazil: −$103,600,000,000
194. United Kingdom: −$173,900,000,000,
195. United States: −$389,500,000,000[17]

International Monetary Fund

In a 2012 article published by the International Monetary Fund (IMF)[2] the authors argue that a current account deficit with higher investments and lower savings may indicate that the economy of a country is highly productive and growing. If there is an excess of imports over exports there may be problems in terms of competitiveness. Low savings and high investment can also be caused by a "reckless fiscal policy or a consumption binge."[2] China's financial system favors the accumulation of large surpluses while the United States carries "large and persistent current account deficits" which has created a trade imbalance.[2]

The authors note that,[2]

Moreover, in practice, private capital often flows from developing to advanced economies. The advanced economies, such as the United States ... run current account deficits, whereas developing countries and emerging market economies often run surpluses or near surpluses. Very poor countries typically run large current account deficits, in proportion to their gross domestic product (GDP), that are financed by official grants and loans.

— Ghosh and Ramakrishnan, IMF, 2012

See also

References

  1. ^ Ecological Economics: Principles And Applications. Herman E. Daly, Joshua Farley; Island Press, 2003
  2. ^ a b c d e Ghosh, Atish; Ramakrishnan, Uma (28 March 2012). "Current Account Deficits: Is There a Problem?". International Monetary Fund. Retrieved 24 December 2015.
  3. ^ BEA-U.S. International Transactions, Third Quarter 2018
  4. ^ shyam (18 August 2009). "Understanding The Current Account In The Balance Of Payments".
  5. ^ "FRB: Speech, Bernanke – The Global Saving Glut and the U.S. Current Account Deficit". www.FederalReserve.gov. 10 March 2005. Retrieved 16 July 2017.
  6. ^ Wolfgang Münchau, „Kernschmelze im Finanzsystem", Carl Hanser Verlag, München, 2008, S. 155ff.; vgl. Benedikt Fehr: „'Bretton Woods II ist tot. Es lebe Bretton Woods III'" in FAZ 12. Mai 2009, S. 32. FAZ.Net, Stephanie Schoenwald:„Globale Ungleichgewichte. Sind sie für die Finanzmarktkrise (mit-) verantwortlich?" KfW (Kreditanstalt für Wiederaufbau) Research. MakroScope. No. 29, Februar 2009. S. 1.
    Zu den außenwirtschaftlichen Ungleichgewichten als „makroökonomischer Nährboden" der Krise siehe auch Deutsche Bundesbank: Finanzstabilitätsbericht 2009, Frankfurt am Main, November 2009 Archived 7 March 2012 at the Wayback Machine (PDF), Gustav Horn, Heike Joebges, Rudolf Zwiener: „Von der Finanzkrise zur Weltwirtschaftskrise (II), Globale Ungleichgewichte: Ursache der Krise und Auswegstrategien für Deutschland" IMK-Report Nr. 40, August 2009, S. 6 f. (PDF; 260 kB)
  7. ^ Heiner Flassbeck: Wege aus der Eurokrise. YouTube https://www.youtube.com/watch?v=mfKuosvO6Ac
  8. ^ Paul Krugman Blog: Germans and Aliens, available on line at: http://krugman.blogs.nytimes.com/2012/01/09/germans-and-aliens/
  9. ^ Joseph Stiglitz: Is Mercantilism Doomed to Fail?, Online verfügbar unter https://www.youtube.com/watch?v=D207fSLnxHk
  10. ^ Central Intelligence Agency. "The World Factbook". www.CIA.gov. Retrieved 16 July 2017.
  11. ^ Current Account Sustainability and Relative Reliability https://www.cia.gov/library/publications/the-world-factbook/rankorder/2187rank.html
  12. ^ Analysis, US Department of Commerce, BEA, Bureau of Economic. "Bureau of Economic Analysis". www.BEA.gov. Retrieved 16 July 2017.
  13. ^ Ellen Frank, Where Do U.S.A Dollars Go When the United States Runs a Trade Deficit? from Dollars & Sense magazine, March/April 2004.
  14. ^ "About". OECD. nd. Retrieved 24 December 2015.
  15. ^ a b Periodical Quarterly Statistics of International Trade: Trends and Indicators. OECD (Report). 2015. ISSN 2313-0857. Retrieved 24 December 2015.
  16. ^ a b c d "Country Comparison: Current Account Balance". CIA. 2015. ISSN 1553-8133. Retrieved 24 December 2015.

Further reading

External links

BACS

Bacs Payment Schemes Limited (Bacs), previously known as Bankers' Automated Clearing Services, is the organisation with responsibility for the schemes behind the clearing and settlement of UK automated payment methods Direct Debit and Bacs Direct Credit, as well as the provision of managed services for third parties. Bacs became a subsidiary of Pay.UK (formerly known as the New Payment System Operator (NPSO)) on 1 May 2018, and as a result of this, overall responsibility for the operations of Direct Debit, Bacs Direct Credit, the Current Account Switch Service, Cash ISA Transfer Service and the Industry Sort Code Directory was handed over to Pay.UK.More than 130 billion transactions have been debited or credited to British bank accounts via Bacs since its inception; in 2018, 6.4 billion UK payments, worth just shy of £5 trillion, were made this way. At the end of November 2018, the number of transactions processed by Bacs in a single day reached a new high of 123 million, while a new monthly record was set in August of the same year when 580 million payments were processed.

Balance of payments

The balance of payments, also known as balance of international payments and abbreviated B.O.P. or BoP, of a country is the record of all economic transactions between the residents of the country and the rest of the world in a particular period of time (e.g. a quarter of a year). These transactions are made by individuals, firms and government bodies. Thus the balance of payments includes all external visible and non-visible transactions of a country. It is an important issue to be studied, especially in international financial management field, for a few reasons.

First, the balance of payments provides detailed information concerning the demand and supply of a country's currency. For example, if Sudan imports more than it exports, then this means that the quantity supplied of Sudanese pounds by the domestic market is likely to exceed the quantity demanded in the foreign exchanging market, ceteris paribus. One can thus infer that the Sudanese pound would be under pressure to depreciate against other currencies. On the other hand, if Sudan exports more than it imports, then the Sudanese pound would be likely to appreciate.

Second, a country's balance of payments data may signal its potential as a business partner for the rest of the world. If a country is grappling with a major balance of payments difficulty, it may not be able to expand imports from the outside world. Instead, the country may be tempted to impose measures to restrict imports and discourage capital outflows in order to improve the balance of payments situation. On the other hand, a country with a significant balance of payments surplus would be more likely to expand imports, offering marketing opportunities for foreign enterprises, and less likely to impose foreign exchange restrictions.

Third, balance of payments data can be used to evaluate the performance of the country in international economic competition. Suppose a country is experiencing trade deficits year after year. This trade data may then signal that the country's domestic industries lack international competitiveness.

To interpret balance of payments data properly, it is necessary to understand how the balance of payments account is constructed.

These transactions include payments for the country's exports and imports of goods, services, financial capital, and financial transfers. It is prepared in a single currency, typically the domestic currency for the country concerned. The balance of payments accounts keep systematic records of all the economic transactions (visible and non-visible) of a country with all other countries in the given time period. In the BoP accounts, all the receipts from abroad are recorded as credit and all the payments to abroad are debits. Since the accounts are maintained by double entry bookkeeping, they show the balance of payments accounts are always balanced. Sources of funds for a nation, such as exports or the receipts of loans and investments, are recorded as positive or surplus items. Uses of funds, such as for imports or to invest in foreign countries, are recorded as negative or deficit items.

When all components of the BoP accounts are included they must sum to zero with no overall surplus or deficit. For example, if a country is importing more than it exports, its trade balance will be in deficit, but the shortfall will have to be counterbalanced in other ways – such as by funds earned from its foreign investments, by running down currency reserves or by receiving loans from other countries.

While the overall BoP accounts will always balance when all types of payments are included, imbalances are possible on individual elements of the BoP, such as the current account, the capital account excluding the central bank's reserve account, or the sum of the two. Imbalances in the latter sum can result in surplus countries accumulating wealth, while deficit nations become increasingly indebted. The term "balance of payments" often refers to this sum: a country's balance of payments is said to be in surplus (equivalently, the balance of payments is positive) by a specific amount if sources of funds (such as export goods sold and bonds sold) exceed uses of funds (such as paying for imported goods and paying for foreign bonds purchased) by that amount. There is said to be a balance of payments deficit (the balance of payments is said to be negative) if the former are less than the latter. A BoP surplus (or deficit) is accompanied by an accumulation (or decumulation) of foreign exchange reserves by the central bank.

Under a fixed exchange rate system, the central bank accommodates those flows by buying up any net inflow of funds into the country or by providing foreign currency funds to the foreign exchange market to match any international outflow of funds, thus preventing the funds flows from affecting the exchange rate between the country's currency and other currencies. Then the net change per year in the central bank's foreign exchange reserves is sometimes called the balance of payments surplus or deficit. Alternatives to a fixed exchange rate system include a managed float where some changes of exchange rates are allowed, or at the other extreme a purely floating exchange rate (also known as a purely flexible exchange rate). With a pure float the central bank does not intervene at all to protect or devalue its currency, allowing the rate to be set by the market, the central bank's foreign exchange reserves do not change, and the balance of payments is always zero.

Balance of trade

The balance of trade, commercial balance, or net exports (sometimes symbolized as NX), is the difference between the monetary value of a nation's exports and imports over a certain time period. Sometimes a distinction is made between a balance of trade for goods versus one for services. The balance of trade measures a flow of exports and imports over a given period of time. The notion of the balance of trade does not mean that exports and imports are "in balance" with each other.

If a country exports a greater value than it imports, it has a trade surplus or positive trade balance, and conversely, if a country imports a greater value than it exports, it has a trade deficit or negative trade balance. As of 2016, about 60 out of 200 countries have a trade surplus. The notion that bilateral trade deficits are bad in and of themselves is overwhelmingly rejected by trade experts and economists.

Bank account

A bank account is a financial account maintained by a bank for a customer. A bank account can be a deposit account, a credit card account, a current account, or any other type of account offered by a financial institution, and represents the funds that a customer has entrusted to the financial institution and from which the customer can make withdrawals. Alternatively, accounts may be loan accounts in which case the customer owes money to the financial institution.

The financial transactions which have occurred within a given period of time on a bank account are reported to the customer on a bank statement and the balance of the accounts at any point in time is the financial position of the customer with the institution.

The laws of each and every country specify the manner in which accounts may be opened and operated. They may specify, for example, who may open an account, how the signatories can identify themselves, deposit and withdrawal limits and many other matters.

Capital account

In macroeconomics and international finance, the capital account is one of two primary components of the balance of payments, the other being the current account. Whereas the current account reflects a nation's net income, the capital account reflects net change in ownership of national assets.

A surplus in the capital account means money is flowing into the country, but unlike a surplus in the current account, the inbound flows effectively represent borrowings or sales of assets rather than payment for work. A deficit in the capital account means money is flowing out of the country, and it suggests the nation is increasing its ownership of foreign assets.

The term "capital account" is used with a narrower meaning by the International Monetary Fund (IMF) and affiliated sources. The IMF splits what the rest of the world calls the capital account into two top-level divisions: financial account and capital account, with by far the bulk of the transactions being recorded in its financial account.

Deposit account

A deposit account is a savings account, current account or any other type of bank account that allows money to be deposited and withdrawn by the account holder. These transactions are recorded on the bank's books, and the resulting balance is recorded as a liability for the bank and represents the amount owed by the bank to the customer. Some banks may charge a fee for this service, while others may pay the customer interest on the funds deposited.

Economy of Pakistan

The economy of Pakistan is the 23rd largest in the world in terms of purchasing power parity (PPP), and 40th largest in terms of nominal gross domestic product. Pakistan has a population of over 207 million (the world's 5th-largest), giving it a nominal GDP per capita of $1,340 in 2019, which ranks 147th in the world and giving it a PPP GDP per capita of 5,709 in 2018, which ranks 130th in the world for 2018. However, Pakistan's undocumented economy is estimated to be 36% of its overall economy, which is not taken into consideration when calculating per capita income. Pakistan is a developing country and is one of the Next Eleven countries identified by Jim O'Neill in a research paper as having a high potential of becoming, along with the BRICS countries, among the world's largest economies in the 21st century. The economy is semi-industrialized, with centres of growth along the Indus River. Primary export commodities include textiles, leather goods, sports goods, chemicals, carpets/rugs and medical instruments.Growth poles of Pakistan's economy are situated along the Indus River; the diversified economies of Karachi and major urban centers in the Punjab, coexisting with lesser developed areas in other parts of the country. The economy has suffered in the past from internal political disputes, a fast-growing population, mixed levels of foreign investment. Foreign exchange reserves are bolstered by steady worker remittances, but a growing current account deficit – driven by a widening trade gap as import growth outstrips export expansion – could draw down reserves and dampen GDP growth in the medium term. Pakistan is currently undergoing a process of economic liberalization, including privatization of all government corporations, aimed to attract foreign investment and decrease budget deficit. In October 2016, foreign currency reserves crossed $24.0 billion which has led to stable outlook on the long-term rating by Standard & Poor's. In 2016, BMI Research report named Pakistan as one of the ten emerging economies with a particular focus on its manufacturing hub.In October 2016, the IMF chief Christine Lagarde confirmed her economic assessment in Islamabad that Pakistan's economy was 'out of crisis' The World Bank predicted in 2016 that by 2018, Pakistan's economic growth will increase to a "robust" 5.4% due to greater inflow of foreign investment, namely from the China-Pakistan Economic Corridor. As of May 2019, the growth rate has been revised and the IMF has predicted that future growth rates will be 2.9%, the lowest in South Asia. According to the World Bank, poverty in Pakistan fell from 64.3% in 2002 to 29.5% in 2014. The country's worsening macroeconomic position has led to Moody's downgrading Pakistan's debt outlook to "negative".In 2017, Pakistan's GDP in terms of purchasing power parity crossed $1 trillion. By May 2019, the Pakistani rupee had undergone a year-on-year depreciation of 30% vis-a-vis the US Dollar.

Flexible mortgage

The term flexible mortgage refers to a residential mortgage loan that offers flexibility in the requirements to make monthly repayments. The flexible mortgage first appeared in Australia in the early 1990s (hence the US term Australian mortgage), however it did not gain popularity until the late 1990s. This technique gained popularity in the US and UK recently due to the United States housing bubble.The term mortgage acceleration is also used, as the mortgage loan can be paid off faster than standard mortgages if the borrower is in a position to do so. With traditional mortgages, borrowers often face large penalties for additional capital repayments or if payments were not made on time.

A specific type of flexible mortgage common in Australia and the United Kingdom is an offset mortgage. The key feature of an offset mortgage is the ability to reduce the interest charged by offsetting a credit balance against the mortgage debt, with interest charged based on the outstanding net debt. Some lenders have a single account for all transactions, this is often referred to as a current account mortgage.

Intelligent Finance

Intelligent Finance (IF) is a Scottish offset bank, a division of Bank of Scotland plc which is part of Lloyds Banking Group. It was established as a division of Halifax plc in 1999 by Jim Spowart, who helped establish other direct financial services firms including Direct Line.

Following a reorganisation of the HBOS group, it is now a division of Bank of Scotland plc. IF's registered headquarters are in Edinburgh, with customer service operations based in Scotland (Livingston, West Lothian, and Rosyth, Fife. It operates throughout the United Kingdom.

IF was set up at a time when many banks were exploring opportunities to use new technology to reduce the costs of providing financial services. IF established what it marketed as "intelligent" products whereby customer pick a combination of all or some of a range of bank accounts including current account, savings account, mortgage and credit card. The credit balance in a person's current account and saving accounts would "offset" any debit balances in the person's mortgage and credit card accounts. The customer would then pay interest on the net balance, potentially allowing savings to be made on borrowings. However, in June 2005 IF withdrew its offset credit card, citing high running costs.

Although the bank was hit by technical problems at its launch, it quickly gained a significant market share in the mortgage and current account market, and is still one of the largest in the U.K

Intelligent Finance sponsored the Scottish First Division football team Livingston FC. From 2006 to 2008 it sponsored the if.comedies award, successor to the Perrier Comedy Award, at the Edinburgh Fringe.

In July 2009, Intelligent Finance withdrew its mortgage and current account products to new customers, although existing customers were unaffected. In March 2013, Intelligent Finance withdrew all its remaining products to new customers. As with mortgages, existing customers continued to be able to operate their accounts.

In Summer 2014, Intelligent Finance asked its savings customers to consider moving their accounts to TSB Bank. Lloyds Banking Group was asked to close Intelligent Finance to new business by the European Commission in order to reduce their market share.

International trade

International trade is the exchange of capital, goods, and services across international borders or territories.In most countries, such trade represents a significant share of gross domestic product (GDP). While international trade has existed throughout history (for example Uttarapatha, Silk Road, Amber Road, scramble for Africa, Atlantic slave trade, salt roads), its economic, social, and political importance has been on the rise in recent centuries.

Carrying out trade at an international level is a complex process when compared to domestic trade. When trade takes place between two or more nations factors like currency, government policies, economy, judicial system, laws, and markets influence trade.

To smoothen and justify the process of trade between countries of different economic standing, some international economic organisations were formed, such as the World Trade Organization. These organisations work towards the facilitation and growth of international trade.

List of countries by current account balance

This is a list of countries by current account balance.

List of countries by current account balance as a percentage of GDP

This article includes a list of countries of the world sorted by current account balance as a percentage of gross domestic product (nominal GDP).

The first list includes 2017 data for members of the International Monetary Fund. The UN World Bank cites the IMF as the source for their data on Current Account Balance, and so is not included separately on this page. The second list includes only countries for which the CIA World Factbook lists 2015 estimates for both Current Account Balance and GDP.

Mercantilism

Mercantilism is a national economic policy that is designed to maximize the exports of a nation. Mercantilism was dominant in modernized parts of Europe from the 16th to the 18th centuries before falling into decline, although some commentators argue that it is still practiced in the economies of industrializing countries in the form of economic interventionism.It promotes government regulation of a nation's economy for the purpose of augmenting state power at the expense of rival national powers. Mercantilism includes a national economic policy aimed at accumulating monetary reserves through a positive balance of trade, especially of finished goods. Historically, such policies frequently led to war and also motivated colonial expansion.Mercantilist theory varies in sophistication from one writer to another and has evolved over time. High tariffs, especially on manufactured goods, was an almost universal feature of mercantilist policy. These policies aim to reduce a possible current account deficit or reach a current account surplus.

With the efforts of supranational organizations such as the World Trade Organization to reduce tariffs globally, non-tariff barriers to trade have assumed a greater importance in neomercantilism.

Monzo (bank)

Monzo Bank Ltd (), is a digital, mobile-only bank based in the United Kingdom. Originally operating through a mobile app and a prepaid debit card, in April 2017 their UK banking licence restrictions were lifted, enabling them to offer a current account. Monzo was one of the earliest of a number of new app-based challenger banks in the UK.

Payments bank

Payments banks is a new model of banks conceptualised by the Reserve Bank of India (RBI). These banks can accept a restricted deposit, which is currently limited to ₹100,000 per customer and may be increased further. These banks cannot issue loans and credit cards. Both current account and savings accounts can be operated by such banks. Payments banks can issue services like ATM cards, debit cards, net-banking and mobile-banking. Bharti Airtel set up India's first live payments bank.

Pingit

Pingit, formerly Barclays Pingit, is a system for the mobile transfer of money in the United Kingdom. It was launched by Barclays in February 2012 and was initially only available for use by Barclays current account holders, who were over the age of 18, for the sending and receiving of payments. This was later extended to all UK current account holders and the age limit was dropped to 16. The application used for Pingit is currently available on iOS and Android.

The latest version of the app supports customers aged over 16 with a personal current banking account with any UK bank, and UK small businesses that bank with Barclays.

There is also an option to receive payments on the Barclays website, which is open to all app users and also to UK small businesses who bank elsewhere and Barclays corporate customers.

Money transfer is made to the account associated with the phone number rather than the app installed on that phone, meaning all phones rather than just smartphones with the app installed would be eligible to receive payments.

The Pingit service works on the Faster Payment Scheme, so payments are effectively instantaneous, even between Barclays and non Barclays customers, and they are free. Pingit is compatible with the Paym mobile payment system which works across other UK banks.

In July 2015, Barclays teamed up with Zapp to allow Pingit to be used at point of sale terminals in shops, and for internet transactions where the Pay by Bank app symbol is displayed. They expect to launch in October.

Tesco Bank

Tesco Bank is a British retail bank which was formed in July 1997 (as Tesco Personal Finance), and which has been wholly owned by Tesco plc since 2008. The bank was formed as part of a 50:50 joint venture between The Royal Bank of Scotland and Tesco, the largest supermarket in the United Kingdom.

Tesco later acquired Royal Bank of Scotland shareholding, which resulted in the bank becoming a wholly owned subsidiary, and now operates under its own banking licence under the Financial Services Compensation Scheme. The bank offers a range of insurance, credit cards, loans, savings, mortgages and travel products, and launched a current account in June 2014.

A unique selling point of Tesco's banking products is that the bank is able to leverage its large customer base to cross-sell financial services products, as customers can accumulate Tesco Clubcard points when they purchase finance products. Tesco Bank came third in the British Bank Awards, with an average customer satisfaction of 87.8%.

Transaction account

A transaction account, also called a checking account, chequing account, current account, demand deposit account, or share draft account at credit unions, is a deposit account held at a bank or other financial institution. It is available to the account owner "on demand" and is available for frequent and immediate access by the account owner or to others as the account owner may direct. Access may be in a variety of ways, such as cash withdrawals, use of debit cards, cheques (checks) and electronic transfer. In economic terms, the funds held in a transaction account are regarded as liquid funds. In accounting terms they are considered as cash.

Transaction accounts are known by a variety of descriptions, including a current account (British English), chequing account or checking account when held by a bank, share draft account when held by a credit union in North America. In the United Kingdom, Hong Kong, India and a number of other countries, they are commonly called current or cheque accounts. Because money is available on demand they are also sometimes known as demand accounts or demand deposit accounts. In the United States, NOW accounts operate as transaction accounts.

Transaction accounts are operated by both businesses and personal users. Depending on the country and local demand economics earning from interest rates varies. Again depending on the country the financial institution that maintains the account may charge the account holder maintenance or transaction fees or offer the service free to the holder and charge only if the holder uses an add-on service such as an overdraft.

World Economic Outlook

The World Economic Outlook (WEO) is a survey conducted and published by the International Monetary Fund. It is published biannually and partly updated twice a year. It portrays the world economy in the near and medium context, with projections for up to four years into the future. WEO forecasts include key macroeconomic indicators, such as GDP, inflation, current account and fiscal balance of more than 180 countries around the globe. It also deals with major economic policy issues.

Terminology
Organizations
and policies
Political economy
Regional organizations
Exports by product

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