Question

Year    Balance of Trade in goods and services ($’b)    Current account balance ($’b)

2005 - 42.70 - 32.66

2006 - 40.73 - 43.11

2007 - 42.65 - 34.83

2008 - 39.12 - 19.75

2009 - 25.64 - 20.32

2010 - 39.68 - 36.72

(a)     

(i)            What is meant by a “deficit on the current account of the balance of payments”?

(ii)          Examine the data from 2005 to 2010. Discuss THREE significant points of comparison between the Balance of trade in goods and services and the Current account balance.                                                                                                                  

Answer 1

1.

Deficit on current account of balance of payments means imports are greater than exports which leads to deficit in the economy.

2. From above data we can infer that balance of trade in goods and services is higher to current account balance except in year 2006. Highest difference between between balance of trade and current account is seen in year 2008 and lowest is seen in 2006. Balance of trade is highest in year 2005 whereas current account balance is highest in 2006.