Daily Management Review

IMF: Payment imbalance is growing in developing economies


Approximately half of the distortions in current accounts are excessive and unreasonable in terms of macroeconomic parameters, the IMF study of balance of payments says. The total volume of trade surpluses of all countries, according to the fund, was $ 1.486 trillion (3.9% of world GDP against 4.2% a year earlier), deficits - $ 1.08 trillion (2.6% of GDP against 2.7%). The difference is caused by statistical discrepancies (ideally the indicators should be equal). In recent years, deficits and surpluses have been increasingly concentrating in developed countries against a background of their decline in China and countries - exporters of raw materials (developed countries account for 73% of the total surplus and only 62% of the total deficit).

Pen Waggener
Pen Waggener
The highest current account surplus was recorded in Germany ($ 296.4 billion, 8% of the country's GDP), Japan ($ 196.1 billion, 4% of GDP) and China ($ 164.9 billion, 1.4% of GDP), the largest the US trade deficit remains at $ 466.2 billion (2.4% of GDP) and Great Britain ($ 106.7 billion, 4.1% of GDP), Canada, India and Turkey. 

So far, the changes in exchange rates have been generally reflecting strengthening or weakening of domestic demand (in addition to the US, the first concerns mainly China and Korea, the second concerns Brazil, Russia, Mexico, Turkey), the IMF believes. However, the analysts indicate that the current softening of US fiscal policy is leading to a tighter monetary regulation, strengthening of the dollar (by about 5% since the beginning of the year) and the trade deficit growth. In turn, this can increase trade disagreements and put additional pressure on emerging markets.

The total debt load in 2017 also declined slightly, but it mainly affected the US (weakening of the dollar in 2017 led to a relatively higher appreciation of assets abroad, which partly offset the traditionally high excess of incoming investments over outgoing ones). In addition to the United States, the United Kingdom, France, Brazil and India (Italy and Spain have a surplus of trade but are debtors) are characterized by a high inflow of capital simultaneously with a significant current account deficit, while China, Japan and Germany, South Korea and Russia remain the largest creditors due to trade surplus.

source: imf.org