Current Account Surplus

Definition of 'Current Account Surplus'


A positive difference between a nation’s savings and investment. A current account surplus indicates that a nation is a net lender to the rest of the world, in contrast to a current account deficit, which indicates that it is a net borrower. The current account is the sum of the trade balance (exports less imports), net income from abroad and net current transfers; as the trade balance is generally the largest of these components, a current account surplus usually implies that the nation is a large exporter and has a positive trade balance. A current account surplus increases a nation’s net assets by the amount of the surplus.

Investopedia explains 'Current Account Surplus'


Nations with large and consistent current account surpluses are typically exporters of manufactured products or energy. With manufactured products, these export-oriented nations either follow a policy of mass-market production – like China – or have a reputation for top quality, like Germany, Japan and Switzerland.

In 2012, the top ten countries with the biggest current account surpluses were – Germany, China, Saudi Arabia, Kuwait, Netherlands, Norway, Russia, Switzerland, Qatar and Japan. More than half of that list comprises nations that are among the world’s largest exporters of oil and gas.

These current account surpluses are used to finance current account deficits in other nations. In 2012, the nations with the biggest current account deficits were the U.S., the U.K, India, Canada, France, Australia and Brazil. China, which is by far the biggest exporter to the U.S., uses its huge dollar surpluses to buy U.S. Treasuries, and as of November 2013, owned $1.32 trillion or about 23% of the total issued.

A nation with consistent current account surpluses may face upward pressure on its currency. Such nations may take steps to stem the appreciation of their currencies in order to maintain their export competitiveness. Japan, for instance, usually intervenes in the foreign exchange market when the yen is rising by buying large amounts of dollars in exchange for yen. China, on the other hand, has its yuan pegged to the US dollar. With China’s trade deficit with the U.S.



comments powered by Disqus
Hot Definitions
  1. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will be executed at a specified price (or better) after a given stop price has been reached. Once the stop price is reached, the stop-limit order becomes a limit order to buy (or sell) at the limit price or better.
  2. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The principle states that, for many phenomena, 20% of invested input is responsible for 80% of the results obtained. Put another way, 80% of consequences stem from 20% of the causes.
  3. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The principle states that, for many phenomena, 20% of invested input is responsible for 80% of the results obtained. Put another way, 80% of consequences stem from 20% of the causes.
  4. Budget Deficit

    A status of financial health in which expenditures exceed revenue. The term "budget deficit" is most commonly used to refer to government spending rather than business or individual spending. When referring to accrued federal government deficits, the term "national debt” is used.
  5. Floating Exchange Rate

    A country's exchange rate regime where its currency is set by the foreign-exchange market through supply and demand for that particular currency relative to other currencies. Thus, floating exchange rates change freely and are determined by trading in the forex market.
  6. Underwriting

    1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies.
Trading Center