What is a Current Account Surplus
A current account surplus is a positive current account balance, indicating that a nation is a net lender to the rest of the world.
BREAKING DOWN Current Account Surplus
The current account measures a country's imports and exports of goods and services over a defined period of time, in addition to earnings from cross-border investments, and transfer payments. Exports, earnings on investments abroad, and incoming transfer payments (aid and remittances) are recorded as credits; imports, foreign investors' earnings on investments in the country, and outgoing transfer payments are recorded as debits.
When credits exceed debits, the country enjoys a current account surplus, meaning that the rest of the world is in effect borrowing from it. A current account surplus increases a nation's net assets by the amount of the surplus. (See also, Balance of Payments.)
Because the trade balance generally has the largest impact on the current account balance, nations with large and consistent current account surpluses tend to be exporters of manufactured products or energy. Manufactured product exporters generally follow a policy of mass-market production – like China – or have a reputation for top quality, like Germany, Japan and Switzerland.
In 2016, according to the World Bank, the ten countries with the largest current account surpluses were Germany, China, Japan, South Korea, the Netherlands, Switzerland, Singapore, Italy, Thailand and Russia. These current account surpluses finance current account deficits in other nations. The U.S. has the largest deficit by far.
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, has frequently intervened in the foreign exchange market when the yen rises by buying large amounts of dollars in exchange for yen.