Getting to grips with economics: What is the current account?

Julie Brownlee, Fsp Invest, 13 Apr. 2015

Tags: current account, what is the current account, current account deficit, south africa’s current account, economics, economy, balance of trade



When the South African Reserve Bank releases its quarterly current account numbers, the market waits with baited breath.

Recently, SA has run with a high current account deficit, which isn’t good for the country’s economy.

So what exactly is the current account? And what affects it?

Read on to find out more…



What is the current account?


South Africa’s current account, as well as for other countries, shows the difference between what the economy earns from exports and what it spends on imports.

Generally there are two main aspects to the current account:

  • There are visible imports and exports, such as cars or commodities; and
  • There are invisible imports and exports, such as financial services or tourism, which involves overseas buyers.

The difference between all these exports and imports is the ‘balance of trade’. You either get a surplus or a deficit:

  • A current account surplus is when exports exceed imports; and
  • A current account deficit is when imports exceed exports.

Also included in a country’s current account are remittances and income from overseas investments.

Remittances are usually from workers sending money back home.


What’s going on with South Africa’s current account?


At the moment, SA is running a current account deficit as imports outweigh imports. Last month, the Reserve Bank released its current account data from the last quarter of last year, which showed a slight improvement from the third quarter of 2014.

The persistent deficit is worrying as it makes the country more dependent on capital flowing into the country from foreign investors to make up the difference.

These inflows are very sensitive to investor sentiment and the prevailing appetite for risk. And with the US likely to hike interest rates this year, this could turn investors away from SA.

So there you have it, what the current account is.

*********** New release ************

What you’re about to read will turn everything you believe about achieving financial security upside-down!

You see, I have unlocked the key to achieving financial freedom. The key that could bank you up to R320,000 in the next 12 months. The key that could finally help you live the life you want to live.

And it’s not the typical hogwash and empty promises you see advertised every day.  My step-by-step instructions will help you to never rely on your salary again… You might even be able to tell your boss to ‘shove it’!

Discover how you can achieve financial security today.

**********************************


Related QA

Pic
lauraint asked:
Hi Josh, thanks for your guidance in reply to the buy of Bitcoin & Ethereum on Lunco Exchange. Was able to transact a buy for both cryptos and [read more]
Published at 19 Feb. 2018 in: Economy Cryptos 1 Answer
Pic
Ndumiso19 asked:
what do I need in order to start making money? [read more]
Published at 20 Jun. 2016 in: Economy Online marketing 1 Answer
Pic
divan1738 asked:
Why is business confidence so low at the moment? [read more]
Published at 26 Nov. 2015 in: Economy Business confidence Low business confidence 1 Answer
Pic
JBelfort asked:
How did SA managed to grow the economy in the third quarter? [read more]
Published at 24 Nov. 2015 in: Economy South african economy Gdp 1 Answer
Pic
ntombi4510 asked:
Why did the Reserve Bank hike interest rates? [read more]
Published at 19 Nov. 2015 in: Economy Interest rates Interest rate rise Reserve bank 1 Answer

Related articles:


Latest:

Comments
0 comments