Viet Nam’s large current account deficit could trigger an economic crisis, State Bank Development Strategy Department Director Le Xuan Nghia warned.
Nghia urged the government to pay more attention to the “dangerous” trade deficit, which reached a record US$7.4 billion in the first three months of this year.
The State Bank of Viet Nam official said the trade deficit was being “sponsored” by
Readers Question I am currently trying to understand the policy options available to the UK Government given the large UK Current Account deficit. Do you have any articles specific to this area that I could read or even if you could reply briefly with your opinion of the policy options available to the government it would really help me in my understanding.It's an interesting question. The first
The Current Account of the balance of payments measures:
1. Trade in Goods
2. Trade in Services (insurance, services, banking e.t.c
3. Investment incomes
4. Foreign aid
The trade deficit is pretty much the same as the current account. It measures the trade in goods and services parts 1 and 2
To create confusion Sometimes people refer to the "trade in goods deficit" which is just of physical
Examine reasons for a deterioration in the current account deficit.
A deterioration in the current account deficit implies a growing current account deficit: i.e. the value of imports increases at a faster rate than exports.
Higher levels of economic growth. Higher growth implies higher levels of consumer spending. Therefore, this will lead to an increase in imports. This is a significant
A current account deficit means the value of imports of goods and services is greater than the value of exports.
The UK has a growing current account deficit. It is currently stands at 3.5% of GDP.
Reasons for this deficit include:
1. Growth in Consumer Spending.
Due to 14 consecutive years of economic growth, a falling savings ratio, rising house prices, and low interest rates, consumer
A look at factors that have contributed to the US current account deficit which has been over 6% of GDP for several years US consumer spending has been rising rapidly due to a combination of Tax cuts Low interest rates Rising house prices (although this is now being reversed) Therefore with rising consumer spending the US has been increasing the value of imports bought into the economy. Furthermore the US has a high marginal propensity to import. Many luxury good like electrical goods and cars tend to be imported. It is these kinds of goods which are bought when incomes rise. Decline in competitiveness. US manufactured goods have been losing comparative advantage to Asian economies. The primary reason is that wage costs in US are much higher than Asian economies. In particular China has seen its trade surplus with America grow due to its low labour costs.Dollar Relatively High compared to current account deficit. Dollar has not devalue
A current account deficit measures the balance of trade in goods services Net Investment incomesA deficit on the current account means a country is importing more than we are exporting. This will have to be matched by a surplus on the financial and / or capital account.The financial account comprises of 2 main features:a) Short Term Capital flows e.g. hot money flows and purchase of securitiesb) Long Term Capital flows e.g. investment in building new factoriesSome economists argue we need not worry about a Current Account Deficit. This is because:1. If a current account deficit is financed from long term capital inflows then this can be beneficial for the economy. Inward investment can increase the productive capacity of the economy.2. In an era of globalisation it is much easier to attract sufficient capital flows to finance the deficit.3. If the deficit gets too large it will cause a devaluation which helps to reduce the deficit. Also when there is a slowdown
