BoP

Balance of Payments (BoP)

A comprehensive record of all economic transactions between the residents of a country and the rest of the world over a specific period, usually a year.

Current Account

A part of the BoP that records the trade in goods and services, income, and current transfers.

Trade in Goods

The export and import of tangible products. A surplus occurs when exports exceed imports, and a deficit occurs when imports exceed exports.

Trade in Services

The export and import of intangible services such as banking, insurance, and tourism.

Primary Income

Earnings on investments abroad (such as dividends, interest, and profits) minus payments made to foreign investors.

Secondary Income (Current Transfers)

Transfers of money where no goods or services are exchanged, such as foreign aid, remittances, and gifts.

Capital Account

A part of the BoP that records capital transfers and the acquisition/disposal of non-produced, non-financial assets.

Capital Transfers

Transfers involving the transfer of ownership of fixed assets or the forgiveness of debts.

Financial Account

A part of the BoP that records transactions involving financial assets and liabilities, including direct investment, portfolio investment, and other investments.

Direct Investment

Investments in physical assets abroad, such as purchasing real estate or establishing businesses.

Current Account Surplus

Occurs when a country’s total exports of goods, services, and transfers exceed its total imports.

Current Account Deficit

Occurs when a country’s total imports of goods, services, and transfers exceed its total exports.

Trade Barriers

Government-imposed restraints on the flow of international goods or services, such as tariffs, quotas, and subsidies.