Balance of payment application Tutor2

Kuwait

24% current account surplus driven by oil and gas export

Singapore

17% current account surplus driven by being global hub for financial services and refined petroleum

Norway

16% current account surplus driven by significant North Sea oil and gas revenue

Suriname

52% current account deficit driven by high levels of external debt servicing and import dependence

Ukraine

13% current account deficit driven by massive reconstruction needs an disrupted export capacity

Cyclical deficit are

partially self correcting or manageable

Structural deficit

require long term supply side policies

One cyclical cause of current account deficit for UK

when real household disposable income rise, UK has high marginal propensity to import (MPM). As consumer feel well off, spend larger amount on imported luxury goods, electronics, and foreign travel. worsen net trade, current account

One structural cause of current account deficit for UK

Low relative productivity and investment. UK face “productivity gap” compared to its trading partners like Germany, USA. Due to low investment, skill gaps in the workforce, and ageing infrastructure

low productivity raise cost of production, raise price, reduce price competitiveness of export, reduce net trade.

To what extent is a large current account deficit for the UK a cause for economic concern? (63 billion 2024)

Current account deficit must be balanced by a surplus on the financial account.

UK reliant on foreign investors to buy UK assets (gov bonds, properties, firms) & continue to attract hot money into the banking system.

If economic condition worsen-speculation drive hot money outflows as seen by post 2022 Truss Mini Budget (capital flight)

A trade deficit allow UK consumer to enjoy a high standard of living. UK benefit from relatively cheaper imports and more choice. UK floating exchange rate, in theory, provide element of automatic stabilisation

Supply side policy effective in the LR in improving Egypt’s current account on the Balance of Payment? (1)

Special Economic Zones:

Suez Canal Economic Zone with tax breaks to attract inward FDI that focuses on manufacturing and processing sectors.
Aim is to achieve import substitution and make Egypt less reliant on tourism as a major export.

(2)

Energy Infrastructure

-”lighthouse” project: Egypt has pivoted from being a gas importer to a potential regional energy hub. Goal is to diversify Egypt from raw gas export into high value green hydrogen production, utilising Egypt’s solar and wind capacity