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. Degree Of Financial Leverage - DFL

    A ratio that measures the sensitivity of a company’s earnings per share (EPS) to fluctuations in its operating income, as a result of changes in its capital structure. Degree of Financial Leverage (DFL) measures the percentage change in EPS for a unit change in earnings before interest and taxes (EBIT).
  2. Jeff Bezos

    Self-made billionaire Jeff Bezos is famous for founding online retail giant Amazon.com.
  3. Re-fracking

    Re-fracking is the practice of returning to older wells that had been fracked in the recent past to capitalize on newer, more effective extraction technology. Re-fracking can be effective on especially tight oil deposits – where the shale products low yields – to extend their productivity.
  4. TIMP (acronym)

    'TIMP' is an acronym that stands for 'Turkey, Indonesia, Mexico and Philippines.' Similar to BRIC (Brazil, Russia, India and China), the acronym was coined by and investor/economist to group fast-growing emerging market economies in similar states of economic development.
  5. Pension Risk Transfer

    When a defined benefit pension provider offloads some or all of the plan’s risk – e.g.: retirement payment liabilities to former employee beneficiaries. The plan sponsor can do this by offering vested plan participants a lump-sum payment to voluntarily leave the plan, or by negotiating with an insurance company to take on the responsibility for paying benefits.
  6. XW

    A symbol used to signify that a security is trading ex-warrant. XW is one of many alphabetic qualifiers that act as a shorthand to tell investors key information about a specific security in a stock quote. These qualifiers should not be confused with ticker symbols, some of which, like qualifiers, are just one or two letters.
Trading Center