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.

RELATED TERMS
  1. Budget Surplus

    A budget surplus is a situation in which income exceeds expenditures. ...
  2. Trade Surplus

    An economic measure of a positive balance of trade, where a country's ...
  3. Producer Surplus

    A producer surplus is the contrast between the amount of a good ...
  4. Adjusted Surplus

    Adjusted surplus is one indication of an insurance company's ...
  5. Balance Of Trade - BOT

    The balance of trade is the difference between a country's import ...
  6. Contributed Surplus

    Contributed surplus is the excess amount of capital from the ...
Related Articles
  1. Insights

    Exploring the Current Account in the Balance of Payments

    Learn how a country's current account balance reflects the country's economic health.
  2. Insights

    The Balance Of Trade

    The balance of trade is the difference between a country’s imports and exports. A trade deficit occurs when a country buys or imports more goods from other countries than it sells or exports. ...
  3. Investing

    Germany Achieves Another Record Trade Surplus

    Germany has posted yet another record trade surplus while the rest of the eurozone struggles from weak demand and deflationary pressures.
  4. Personal Finance

    Debt versus deficit: Understanding the differences

    An educational article explaining in detail how deficit differs from debt and how they are related.
  5. Trading

    What forex traders need to know about the yen

    The Japanese yen possesses some unique qualities that traders should know before jumping in.
  6. Trading

    The Plaza Accord: The World Intervenes In Currency Markets

    In 1985, the G-5 nations signed an agreement to devalue the United States currency and correct the GDP. To an extent, it worked. But there were casualties.
  7. Insights

    An Analysis Of The US Trade Deficit

    The United States' trade deficit is historically large, the biggest in the world. With luck, it'll get even larger.
  8. Insights

    Is Germany Carrying The European Economy?

    Germany has been widely viewed as the economic catalyst and stabilizer for the European Union and for good reason.
  9. Investing

    What's a Trial Balance?

    A trial balance is a worksheet listing the debit or credit balances of all the ledger accounts for an entity. Under accounting theory, the total of all the debits must equal the total of all ...
RELATED FAQS
  1. What is the difference between consumer surplus and economic surplus?

    Learn the difference between consumer surplus and economic surplus, how the concepts are related and the important theoretical ... Read Answer >>
  2. What is the difference between the current account and the capital account?

    Learn how to differentiate between the capital account and the current account, the two components of the balance of payments ... Read Answer >>
  3. What transactions are included in a country's balance of payments?

    Learn about the many types of transactions that are recorded in a country's balance of payments, including the current, capital ... Read Answer >>
  4. Is a deficit in the balance of payments a bad thing?

    Discover how it might be possible to run a balance of payments deficit, what that means in terms of international trade and ... Read Answer >>
  5. At what level is the current account deficit considered excessive, in terms of percent?

    Take a deeper look at the variables that impact current account deficits, and learn why not all types of deficits have equal ... Read Answer >>
Hot Definitions
  1. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
  2. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
  3. Relative Strength Index - RSI

    Relative Strength Indicator (RSI) is a technical momentum indicator that compares the magnitude of recent gains to recent ...
  4. Dividend

    A dividend is a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.
  5. Inventory Turnover

    Inventory turnover is a ratio showing how many times a company has sold and replaces inventory over a period.
  6. Watchlist

    A watchlist is list of securities being monitored for potential trading or investing opportunities.
Trading Center