The balance of payments adds up economic dealings between residents and non-residents. The current account covers trade and income; the capital and financial accounts cover investments and loans. In principle the accounts balance through reserve changes and statistical residuals.
Key takeaways
- A current-account deficit must be matched by net financial inflows or reserve drawdowns.
- Errors and omissions can be large when informal trade or FX is significant.
- BoP data is a map of pressures on the currency, not a moral scorecard.
- Read the components, not only the headline surplus or deficit label.