What is the balance of payments?
The balance of payments records transactions between residents of an economy and the rest of the world over a period.
Accounts
1. Current account It includes goods, services, primary and secondary income. A current-account deficit is broader than a goods-trade deficit. 2. Financial account Direct, portfolio and other financial flows plus reserves are recorded using statistical sign conventions. 3. Accounting Entries are recorded under a common framework. Measurement gaps can appear as errors and omissions. 4. Periods One month does not define a year. Seasonality, energy costs and tourism can matter.
Reading the data
5. Financing Investment, borrowing and reserve changes can accompany a current-account gap, with different risks. 6. Assessment Consider the GDP ratio, funding mix, debt maturities and external assets, not one headline number. 7. A simple example A goods-trade gap can coexist with services revenue. Direct investment and short-term debt finance external balances with different risks.