## EXECUTIVE SUMMARY

## Source details

**Canonical URL:** [EXECUTIVE SUMMARY](https://www.imf.org/-/media/files/publications/esr/2020/english/execsum.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/esr/2020/english/execsum.pdf.md)
- [Structured JSON version](/-/media/files/publications/esr/2020/english/execsum.pdf.json)

---

### Global current account trends and 2020 outlook
- In 2019 the global current account balance (the absolute sum of all surpluses and deficits) declined by 0.2 percentage point of world GDP, to 2.9 percent of world GDP.
- The IMF’s multilateral approach suggests that about 40 percent of overall current account surpluses and deficits were excessive in 2019, only slightly less than in 2018.
- At a global level, the latest IMF staff forecasts for 2020 imply a modest narrowing in current account surpluses and deficits by some 0.3 percent of world GDP, although subject to high uncertainty.
- For economies dependent on severely affected sectors, such as oil and tourism, or reliant on remittances, negative effects on external current account balances are expected to exceed 2 percent of GDP and will likely require significant economic adjustment.

### External positions, vulnerabilities, and currency movements
- The overall configuration of external positions in 2019 implied persistent vulnerabilities and remaining policy challenges on the eve of the pandemic.
- Larger-than-warranted current account balances were mostly in the euro area (driven by Germany and the Netherlands).
- Lower-than-warranted current account balances mainly existed among Canada, the United Kingdom, and the United States.
- China’s assessed external position remained, as in 2018, broadly in line with fundamentals and desirable policies, due to offsetting policy gaps and structural distortions.
- Currency movements were generally modest, with exceptions including emerging market and developing economies with preexisting vulnerabilities.
- The deterioration in financial market sentiment early in the crisis triggered a sudden capital flow reversal and currency depreciations across numerous emerging market and developing economies; global reserve currencies appreciated.
- Subsequent improvement in risk sentiment, reflecting exceptional monetary and fiscal policy support, came with a stabilization in capital flows and some unwinding of initial currency shifts.
- The stocks of external assets and liabilities have reached historic highs, with attendant risks to both debtor and creditor countries.

### Risks and scenarios
- Analysis suggests that a further worsening in risk sentiment could—for economies with preexisting vulnerabilities, such as large current account deficits, a high share of foreign currency debt, and limited international reserves—further increase risks of an external crisis.
- A second wave of the crisis, with a renewed tightening in global financial conditions, could:
  - narrow the scope for emerging market and developing economies to run current account deficits;
  - further reduce the current account balances of commodity exporters; and
  - deepen the decline in global trade.

### Policy recommendations — Near term
- Continue policy focus on providing relief and promoting economic recovery.
- For adjusting to external shocks (for example, the fall in commodity prices or tourism), countries with flexible exchange rates should allow them to adjust as needed, where feasible.
- For economies experiencing disruptive balance of payments pressures and without access to private external financing, official financing would help to ensure that health care spending is not compromised.
- Avoid tariff and nontariff barriers to trade, especially on medical equipment and supplies, and roll back recent new restrictions on trade.

### Policy recommendations — Medium term
- Address economic and policy distortions that predated the crisis to prevent persistence or worsening of imbalances.
- Where excess current account deficits in 2019 partly reflected larger-than-desirable fiscal deficits and where such imbalances persist beyond the crisis, fiscal consolidation over the medium term would:
  - promote debt sustainability;
  - reduce the current account gap; and
  - facilitate raising international reserves.
- Countries with lingering export competitiveness challenges would benefit from productivity-raising reforms.
- In economies where excess current account surpluses that existed before the COVID-19 crisis persist after the crisis, prioritize reforms that encourage investment and discourage excessive private saving.
- In economies with remaining fiscal space, a growth-oriented fiscal policy with greater public sector investment would make the economy more resilient and narrow the excess current account surplus.
- In some cases, reforms to discourage excessive precautionary saving by expanding the social safety net may also be warranted.

*International Monetary Fund | 2020 — EXECUTIVE SUMMARY*

---


_Source: https://www.imf.org/-/media/files/publications/esr/2020/english/execsum.pdf_