## ch1

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### Pandemic shocks, trade, and current accounts
- Trade in medical goods and personal protective equipment is estimated to have increased Malaysia’s current account by 1.3 percent of GDP.
- The pandemic-induced shift in household consumption toward goods:
  - Contributed to a sharp recovery in goods trade that surpassed its pre-COVID-19 level and returned to its pre-COVID-19 trend in 2021.
  - Is estimated to have increased the United States current account deficit by 0.4 percent of GDP and China’s surplus by 0.3 percent of GDP in 2021.
- Trade in services remained below pre-pandemic levels in 2021 and is not projected to approach pre-pandemic levels until 2023.
- High demand for tradable goods and pandemic-related supply bottlenecks increased shipping costs noticeably in 2021, significantly increasing the current account balance of some economies through higher sea transport service export prices (examples: France and Korea).

### Household consumption composition, savings, and balance-sheet dynamics
- Composition shifts:
  - Pandemic shifted household consumption away from services toward goods; this shift moderated but did not reverse in 2021.
  - Advanced economies: household consumption of goods declined throughout 2021 but remained above pre-pandemic levels at end-2021; household consumption of services was recovering but still below pre-pandemic levels.
  - Emerging markets: consumption of services declined during 2021 after a small recovery in late 2020, and consumption of goods rose.
- Sectoral saving movements in advanced economies:
  - Household saving is declining as pandemic-related subsidies and transfers are withdrawn but remains above pre-pandemic levels.
  - Corporate saving remained broadly unchanged.
  - Government saving is moving toward pre-pandemic levels as fiscal support is withdrawn.
- Distributional and wealth effects:
  - Accumulated savings explain only part of increased household wealth; surging equity and housing prices increased household wealth.
  - Increase in aggregate net financial wealth was much larger in the United States than in Europe; in the United States most of the increase was driven by valuation changes.
  - The overall increase in net wealth during COVID-19 was uneven: much accrued to individuals at the top of the distribution.
- Implications:
  - Further unwinding of accumulated household savings could affect current account balances, but the impact is uncertain and depends on distribution of balance-sheet improvements.

### Global current account balances, drivers, and projections
- Trends and 2021 outcomes:
  - Global current account balances had been on a declining trend before widening because of the pandemic in 2020, and they continued to increase in 2021.
  - Global current account balances widened by ½ percentage point of world GDP to 3.5 percent of world GDP in 2021.
  - Global excess current account balances (sum of absolute IMF staff–assessed current account gaps) narrowed to 0.9 percent of world GDP in 2021 compared with 1.2 percent of world GDP in 2020.
  - The absolute sum of current account norms widened to 1.4 percent of GDP in 2021, from 1.1 percent of GDP in 2020.
  - After netting out COVID-19 factors, global balances still increased in 2021 and hovered at about their 2019 level.
- Forecast and drivers:
  - Global balances are expected to widen further in 2022 (incorporating the impact of the war in Ukraine) before narrowing over the medium term (2023–27).
  - Drivers include increases in commodity prices, asymmetric pandemic impacts (travel and medical shock, consumption shift, transportation costs), and monetary tightening (dollar appreciation).
  - Medium-term expectation: balances return to pre-pandemic downward trend as commodity prices normalize and COVID-19’s impact fades, and current account deficit economies implement fiscal consolidation faster than surplus economies.

### Currencies, capital flows, and net international investment positions
- Currency movements in 2021:
  - Relatively limited in most advanced economies; Japan and Korea experienced depreciations and the United States experienced appreciation.
  - Several emerging market currencies depreciated in 2021 (examples: Thailand, Türkiye); China’s currency experienced considerable appreciation.
- Capital flows and reserves:
  - Most emerging markets accumulated reserves in 2021.
  - Capital inflows by nonresidents to emerging markets were stable in 2021; FDI flows peaked at the start of 2021 but declined thereafter; portfolio flows ended the year in net outflows.
  - Monetary policy tightening is driving currency movements in 2022; the US dollar has appreciated by about 5 percent in nominal effective terms in the first half of 2022.
- Net International Investment Position (selected exact figures):
  - United States NIIP (US$ billions): –9,685 (2018), –11,231 (2019), –14,011 (2020), –18,101 (2021); percent of world GDP: –11.3, –12.9, –16.5, –18.7; percent of GDP: 47.2, 52.6, 67.1, 78.7.
  - China NIIP (US$ billions): 2,108 (2018), 2,300 (2019), 2,287 (2020), 1,983 (2021); percent of world GDP: 2.5, 2.6, 2.7, 2.1; percent of GDP: 15.2, 16.0, 15.4, 11.2.
  - Japan NIIP (US$ billions): 3,033 (2018), 3,271 (2019), 3,417 (2020), 3,748 (2021); percent of world GDP: 3.5, 3.7, 4.0, 3.9; percent of GDP: 60.2, 63.8, 67.8, 75.9.
  - Euro Area (memorandum) NIIP (US$ billions): –987 (2018), –574 (2019), 625 (2020), –218 (2021); percent of world GDP: –1.1, –0.7, 0.7, –0.2; percent of GDP: –7.2, –4.3, 4.8, –1.5.
  - Overall Creditors (aggregate): 15,859 (2018), 17,616 (2019), 19,836 (2020), 21,034 (2021); percent of world GDP: 18.5, 20.2, 23.3, 21.8.
  - Overall Debtors (aggregate): –18,808 (2018), –20,897 (2019), –23,580 (2020), –27,595 (2021); percent of world GDP: –21.9, –23.9, –27.7, –28.6.
- Large debtor and creditor economies:
  - Largest debtor economy: United States (net international investment position declined from −67 percent of GDP in 2020 to −79 percent of GDP in 2021 as noted in narrative).
  - Other large debtors: Australia, Spain, the United Kingdom.
  - Large creditor economies include China, Germany, Hong Kong SAR, Japan, The Netherlands, Singapore, and Switzerland.

### Global financial safety net and reserves
- Size and composition (2021 exact figures):
  - Global financial safety net stood at 19 percent of global GDP ($18.4 trillion) in 2021, down from 22 percent of global GDP in 2020 ($18.6 trillion).
  - Composition in 2021:
    - $14.8 trillion in reserves (including the August 2021 SDR allocation of $650 billion),
    - $1.4 trillion in bilateral swap lines,
    - $1.2 trillion in regional financing arrangements,
    - $1 trillion in (text truncated in source).
- Evolution:
  - Expanded in 2020 to accommodate the COVID-19 shock and narrowed in 2021 when the Federal Reserve’s temporary bilateral swap lines expired.
- Role:
  - Maintaining liquidity in the global financial system and IMF lending programs provide a safety net for countries hit by balance-of-payment shocks.

### External assessment methodology and 2021 classification outcomes
- Methodology:
  - IMF external assessment framework combines EBA model outputs, estimated COVID-19 effects, and judgment/country-specific insights.
  - EBA applies cross-country panel regressions; special adjustments strip pandemic-associated factors (travel and medical trade shocks, consumption shift, transportation costs) and other country-specific adjustors (measurement issues, drought, demographics, NIIP).
  - Coverage: 30 largest economies representing 87 percent of global GDP.
  - “Broadly in line” corresponds to current account gap of ±1 percent of GDP; other qualitative categories generally map to ranges specified in the source.
- Changes in 2021 (qualitative categorizations):
  - Moderately/stronger/substantially stronger (ten economies): Germany, Malaysia, The Netherlands, Poland, Russia, Singapore, Sweden, Thailand, Australia, and the euro area (entered this category in 2021).
  - Moderately/weaker (five economies): Argentina, Belgium, Canada, South Africa, and the United States.
  - Broadly in line (15 economies): Brazil, China, Hong Kong SAR, India, Indonesia, Italy, Japan, Korea, Spain, Switzerland, France, Mexico, Saudi Arabia, Türkiye, and the United Kingdom (entered this category in 2021).
- Annex Table 1.1.3 (selected country-level exact values preserved):
  - Argentina: Actual CA Balance [A] 1.4; Cycl. Adj. CA Balance [B] 0.5; EBA CA Norm [C] 0.2; EBA CA Gap [D] 0.3; IMF Staff-Assessed CA Gap [E] –0.5; IMF Staff Adjustments [F] –0.8 (Covid-19 [G] 0.0; CA [H] 0.0; Norm [I] 0.8).
  - Australia: [A] 3.5; [B] 1.7; [C] –0.9; [D] 2.6; [E] 2.7; [F] 0.2 (G 0.2; H 0.0; I 0.0).
  - Belgium: [A] –0.4; [B] 0.0; [C] 3.1; [D] –3.1; [E] –3.3; [F] –0.2 (G –0.2; H 0.0; I 0.0).
  - China: [A] 1.8; [B] 2.2; [C] 0.8; [D] 1.4; [E] –0.3; [F] –1.6 (G –1.6; H 0.0; I 0.0).
  - Germany: [A] 7.4; [B] 7.6; [C] 3.3; [D] 4.3; [E] 3.7; [F] –0.6 (G –0.6; H 0.0; I 0.0).
  - Malaysia: [A] 3.8; [B] 2.6; [C] –0.1; [D] 2.7; [E] 1.8; [F] –0.8 (G –0.8; H 0.0; I 0.0).
  - The Netherlands: [A] 9.0; [B] 9.2; [C] 5.1; [D] 4.1; [E] 2.0; [F] –2.1 (G –0.4; H –1.7; I 0.0).
  - Singapore: [A] 18.1; [B] 18.8; IMF Staff-Assessed CA Gap [E] 5.2; IMF Staff Adjustments [F] –1.4 (G –1.4; H 0.0; I 0.0).
  - Saudi Arabia: [A] 5.3; [B] 5.4; IMF Staff-Assessed CA Gap [E] –1.0; IMF Staff Adjustments [F] 1.1 (G 1.1; H 0.0; I 0.0).
  - Sweden: [A] 5.5; [B] 5.3; [C] 1.2; [D] 4.1; [E] 3.6; [F] –0.5 (G –0.5; H 0.0; I 0.0).
  - Switzerland: [A] 9.3; [B] 9.9; [C] 6.8; [D] 3.1; [E] –0.9; [F] –4.0 (G –0.6; H –3.4; I 0.0).
  - Thailand: [A] –2.2; [B] –2.8; [C] 1.4; [D] –4.2; [E] 1.4; [F] 5.6 (G 5.6; H 0.0; I 0.0).
  - United Kingdom: [A] –2.6; [B] –2.0; [C] –0.7; [D] –1.3; [E] –0.1; [F] 1.2 (G 0.3; H 0.9; I 0.0).
  - United States: [A] –3.6; [B] –3.2; [C] –1.3; [D] –1.9; [E] –1.1; [F] 0.8 (G 0.8; H 0.0; I 0.0).
  - Aggregate metrics: Absolute sum of excess surpluses and deficits [5] 1.6 (percent of aggregate GDP); Discrepancy for all EBA/ESR economies [6] –0.04 (percent of aggregate GDP).

### Risks to the external outlook
- Commodity prices and war in Ukraine:
  - 1.3 percentage points of GDP is driven by an increase in the cost of energy imports and a collapse in exports to Russia stemming from sanctions related to the war in Ukraine.
  - A prolonged war could widen global current account balances in 2022 beyond the baseline and delay adjustment.
  - Example country projections and impacts:
    - United States current account deficit projected to remain elevated at 3.7 percent of GDP.
    - China’s current account surplus projected to decline by 0.4 percentage point of GDP to 1.4 percent of GDP in 2022.
    - Commodity exporters: Saudi Arabia projected increase by 12.1 percentage points of GDP; Indonesia increase by 1.9 percentage-points of GDP.
    - Commodity importers: India projected current account deficit increasing by 1.9 percentage points of GDP.
    - Russia projected current account surplus increase by 5 percentage points of GDP (import compression, positive terms of trade, resilient export volumes).
- Financial tightening and capital-flow risks:
  - Continued monetary tightening in the United States implies further tightening of global financial conditions and risks of disruptive capital outflows from emerging markets.
  - Stock of external liabilities at end-2021 exceeded reserves for most emerging and developing economies.
  - IMF staff estimates capital flows at risk at the 5 percent level to be 2.3 percent of GDP and the probability of outflows to be about 30 percent (April 2022 Global Financial Stability Report).
- Trade tensions and fragmentation, China slowdown, fiscal deviations, and climate risks can all widen or delay rebalancing.

### Policy priorities and country-tailored recommendations
- Multilateral cooperation:
  - Essential to address humanitarian crises, facilitate the green transition, and counter risks of global economic fragmentation; support open trade of food and agricultural inputs and invest in climate-resilient agriculture.
- Global financial safety net:
  - Maintain liquidity, use IMF lending programs to manage balance-of-payment shocks.
- Capital flow and exchange rate policies:
  - IMF Institutional View guidance for managing capital flow volatility.
  - Exchange rate flexibility to absorb shocks; foreign exchange intervention in economies with shallow markets; temporary capital flow management measures in imminent crisis circumstances or inflow surges.
- Tailored country recommendations:
  - Economies with weaker-than-warranted external positions:
    - Fiscal consolidation where excess current account deficits partially reflected fiscal deficits above desirable medium-term levels (example: United States), implemented to prevent long-term scarring and protect infrastructure, health care, and education.
    - Protect vulnerable households from rising oil and food prices.
    - In several emerging markets with weaker-than-warranted positions (examples: Argentina and South Africa), pursue gradual but substantial growth-friendly fiscal consolidation while providing space for infrastructure and social spending and accumulating international reserves.
    - Address structural competitiveness challenges through labor, product market, and other reforms to promote green, digital, and inclusive growth.
  - Economies with stronger-than-warranted external positions:
    - Intensify reforms that encourage investment and discourage excessive private saving; fiscal policies can support these objectives where there is fiscal space and well-anchored inflation expectations.
    - Examples: additional fiscal spending in Germany and the Netherlands to foster investment and deal with repercussions from the war in Ukraine while promoting external rebalancing.
    - Promote public and corporate investment to facilitate greener structural transformation (examples: Poland and Sweden).
    - In some emerging markets, reforms to discourage excessive precautionary saving and support consumption by expanding social safety nets (Malaysia, Thailand) and tackling informality (Thailand).
  - Economies broadly in line with fundamentals:
    - Continue to address domestic imbalances, accelerate structural reforms (including state-owned enterprise reforms), strengthen social protection to reduce household precautionary savings (example: China).
    - In countries with large external liabilities (example: Spain), keep current account balance in line with its norm via fiscal consolidation and higher private savings achieved through productivity gains, wage flexibility, labor market reforms, education, and innovation.

### Natural disasters, climate adaptation scenarios, and external impacts (Box 1.2)
- Empirical finding (disaster-prone sample): after an initial disaster shock, the current account (percent of GDP) deteriorates up to 2 percentage points.
- DIGNAD model baseline (assumed disaster losses = 20 percent of GDP):
  - GDP reduces by 6.9 percent in the first two years, then recovers slowly.
  - Baseline current account impact: external debt increases; real exchange rate appreciation; current account deficit increases by 2 percentage points after the disaster and remains elevated for 10 years.
- Scenario: Ex ante adaptation only (ex ante investment = 2.5 percent of GDP cumulatively over five years, funded by external borrowing):
  - Pre-disaster: current account deficit increases by 0.6 percentage point (pre-disaster appreciation).
  - Post-disaster: GDP falls by 2.9 percent within two years (lower than baseline 6.9 percent); adaptation dampens reconstruction burden and eases current account deterioration.
- Scenario: Adaptation plus contingency fund (1.25 percent of GDP adaptation + 1.25 percent of GDP contingency fund over five years):
  - Pre-disaster: current account deficit worsens by 0.4 percentage point.
  - Post-disaster: lower adaptation leads to greater damage; withdrawals from contingency fund and larger financing needs trigger larger real exchange rate appreciation and worsen current account deficit by 1.1 percentage points after the disaster.
- Policy implications:
  - Resilient public capital softens disaster impacts and smooths current account fluctuations.
  - Financial protection (contingency funds) provides immediate resources and improves government net asset position.
  - Ex ante adaptation policy should be based on country-specific cost-benefit analysis.

### Trade restrictions and nontariff barriers (NTBs) (Box 1.4)
- NTB index:
  - Novel index for 157 countries; NTBs index varies from 0 to 20 in this box (full index varies 0 to 22 when tariff components included).
  - Historical patterns: NTB index was high across income levels in the 1960s and has declined significantly in advanced economies; restrictions remain high in emerging markets and low-income countries (examples: India and South Africa).
- Econometric estimates (local projections):
  - A two standard deviation increase in the NTB index is associated with:
    - An almost 4 percent decline in import volumes after five years.
    - Exports fall by about 3 percent after five years.
    - On net, trade balance and current account balance are unchanged in the medium term.
    - GDP growth reduction of about 1.7 percent five years after the reform; output losses driven by decreased investment and productivity.
  - NTBs curtail participation in global value chains and cascade costs with each border crossing.

*Italic: Source — CHAPTER 1 EXTERNAL POSITIONS AND POLICIES, 2022 EXTERNAL SECTOR REPORT, International Monetary Fund.*

### 4.4 percent of GDP in 2021. Trade in medical goods and personal

### ch1 - 4.4 percent of GDP in 2021. Trade in medical goods and personal

### Pandemic shocks, trade in goods, and current accounts
- Trade in medical goods and personal protective equipment is estimated to have increased Malaysia’s current account by 1.3 percent of GDP.
- The pandemic-induced shift in household consumption toward goods contributed to a sharp recovery in goods trade that surpassed its pre-COVID-19 level and returned to its pre-COVID-19 trend in 2021.
- In 2021 the consumption shift is estimated to have increased the United States current account deficit by 0.4 percent of GDP and China’s surplus by 0.3 percent of GDP.
- Trade in services remained below pre-pandemic levels in 2021 and is not projected to approach pre-pandemic levels until 2023, reflecting new coronavirus variants and travel restrictions.

### Household consumption composition and saving-investment dynamics
- The pandemic shifted household consumption composition away from services toward goods; this shift moderated but did not reverse in 2021.
- Advanced economies: household consumption of goods declined throughout 2021 but remained above pre-pandemic levels at end-2021; household consumption of services was recovering but still below pre-pandemic levels.
- Emerging markets: consumption of services declined during 2021 after a small recovery in late 2020, and consumption of goods rose.
- Private and public saving moved in opposite directions in advanced economies: household saving is declining as pandemic-related subsidies and transfers are withdrawn but remains above pre-pandemic levels; corporate saving remained broadly unchanged; government saving is moving toward pre-pandemic levels as fiscal support is withdrawn.
- Further unwinding of accumulated household savings could affect current account balances, although the impact is subject to uncertainty about the extent and distribution of household balance-sheet improvements.

### Transportation costs and shipping impacts
- High demand for tradable goods in advanced economies and pandemic-related supply bottlenecks increased shipping costs noticeably in 2021, significantly increasing the current account balance of some economies (for example, France and Korea) through higher sea transport service export prices.

### Global current account balances and projections
- Global current account balances had been on a declining trend before widening because of the pandemic in 2020, and they continued to increase in 2021.
- The pandemic’s asymmetric impact on external positions (travel and medical shock, consumption shift, transportation costs) contributed to widening global balances in 2021.
- Global balances are expected to widen further in 2022, reflecting both the increase in commodity prices (including because of the war in Ukraine) and the pandemic’s continued asymmetric impact on external positions, before narrowing over the medium term.
- After netting out COVID-19 factors, global balances still increased in 2021 (likely reflecting the increase in oil prices) and hovered at about their 2019 level.
- The forecast for global current account balances has been revised up for 2022 since the January 2022 World Economic Outlook Update, incorporating the impact of the war in Ukraine, which is expected to widen global current account balances through commodity price effects.
- Over the medium term, global balances are expected to return to their pre-pandemic downward trend as commodity prices normalize and COVID-19’s impact fades, and as current account deficit economies are expected to implement fiscal consolidation faster than current account surplus economies.

### Currencies, financial flows, and balance sheets
- Currency movements in 2021 were relatively limited in most advanced economies; Japan and Korea experienced depreciations and the United States experienced appreciation.
- Several emerging market currencies depreciated in 2021 driven by tightening global financial conditions and weak domestic prospects (for example, Thailand) or by sharply easing domestic monetary conditions (for example, Türkiye). China’s currency experienced considerable appreciation.
- Most emerging markets accumulated reserves in 2021.
- Capital inflows by nonresidents to emerging markets were stable in 2021. Foreign direct investment flows peaked at the start of 2021 but declined thereafter; portfolio flows ended the year in net outflows.
- Monetary policy tightening is driving currency movements in 2022; the US dollar has appreciated by about 5 percent in nominal effective terms in the first half of 2022.
- The United States remains the largest debtor economy; its net international investment position declined from −67 percent of GDP in 2020 to −79 percent of GDP in 2021. Other large debtor economies include Australia, Spain, and the United Kingdom. Large creditor economies include China, Germany, Hong Kong SAR, Japan, The Netherlands, Singapore, and Switzerland.

### Global financial safety net and reserves
- The global financial safety net expanded in 2020 to accommodate the COVID-19 shock and narrowed in 2021 when the Federal Reserve’s temporary bilateral swap lines expired.
- As of 2021 the global financial safety net stood at 19 percent of global GDP ($18.4 trillion), down from 22 percent of global GDP in 2020 ($18.6 trillion).
- The global financial safety net in 2021 comprised $14.8 trillion in reserves (including the August 2021 SDR allocation of $650 billion), $1.4 trillion in bilateral swap lines, $1.2 trillion in regional financing arrangements, and $1 trillion in

*Italic: Source — CHAPTER 1 EXTERNAL POSITIONS AND POLICIES, 2022 EXTERNAL SECTOR REPORT, International Monetary Fund.*

### 2. Net Portfolio Inflows

### 2. Net Portfolio Inflows

### Methodology and Adjustments
- The IMF’s external assessment framework combines numerical inputs from models of the refined 2022 External Balance Assessment (EBA) methodology, the estimated effects of the COVID-19 crisis, and analytically grounded judgment and country-specific insights.
- The EBA methodology produces multilaterally consistent estimates for current account and real exchange rate norms by applying estimated coefficients from a cross-country panel regression to country-specific macroeconomic, structural, and desired policy variables.
- Special adjustments were made to strip out pandemic-associated factors: the travel and medical trade shocks, the shift in consumption, and transportation costs (see Online Annex 1.2 referenced in the source).
- Country-specific adjustors were also applied for measurement issues, severe drought, demographics, and net international investment position considerations.
- The oil balance adjustor used in 2020 was dropped because oil demand and world prices moved closer to pre-pandemic levels.

### Coverage and Scope
- IMF staff arrives at a holistic overall external sector assessment for 30 of the world’s largest economies, which represent 87 percent of global GDP.
- External positions are assessed holistically but generally anchored on the current account assessment. “Broadly in line” is consistent with a current account gap of ±1 percent of GDP. Moderately stronger/stronger/substantially stronger correspond generally to current account gaps of [1 percent to 2 percent], [2 percent to 4 percent], and greater than 4 percent, respectively. Moderately weaker/weaker/substantially weaker are symmetrically defined.

### Changes in External Assessments in 2021
- In 12 of the 30 economies, assessments changed categories in 2021 compared with 2020.
- IMF staff–assessed external position categorizations for 2021:
  - Moderately stronger, stronger, or substantially stronger than consistent with medium-term fundamentals and desirable policies (ten economies): Germany, Malaysia, The Netherlands, Poland, Russia, Singapore, Sweden, Thailand, Australia, and the euro area (entered this category in 2021).
  - Moderately weaker or weaker than consistent with medium-term fundamentals and desirable policies (five economies): Argentina, Belgium, Canada, South Africa, and the United States.
  - Broadly in line with fundamentals and desirable policies (15 economies): Brazil, China, Hong Kong SAR, India, Indonesia, Italy, Japan, Korea, Spain, Switzerland, France, Mexico, Saudi Arabia, Türkiye, and the United Kingdom (entered this category in 2021).

### Net International Investment Positions and Selected Levels
- Table 1.2 presents Net International Investment Position (NIIP) data (2018–21) in both US dollars and percent of world GDP and percent of GDP for selected economies. Selected figures extracted exactly as presented:
  - United States: –9,685 (2018), –11,231 (2019), –14,011 (2020), –18,101 (2021); –11.3, –12.9, –16.5, –18.7 (percent of world GDP); 47.2, 52.6, 67.1, 78.7 (percent of GDP).
  - China: 2,108 (2018), 2,300 (2019), 2,287 (2020), 1,983 (2021); 2.5, 2.6, 2.7, 2.1 (percent of world GDP); 15.2, 16.0, 15.4, 11.2 (percent of GDP).
  - Japan: 3,033 (2018), 3,271 (2019), 3,417 (2020), 3,748 (2021); 3.5, 3.7, 4.0, 3.9 (percent of world GDP); 60.2, 63.8, 67.8, 75.9 (percent of GDP).
  - Euro Area (memorandum): –987 (2018), –574 (2019), 625 (2020), –218 (2021); –1.1, –0.7, 0.7, –0.2 (percent of world GDP); –7.2, –4.3, 4.8, –1.5 (percent of GDP).
  - Overall Creditors (aggregate line in table): 15,859 (2018), 17,616 (2019), 19,836 (2020), 21,034 (2021); 18.5, 20.2, 23.3, 21.8 (percent of world GDP).
  - Overall Debtors (aggregate line in table): –18,808 (2018), –20,897 (2019), –23,580 (2020), –27,595 (2021); –21.9, –23.9, –27.7, –28.6 (percent of world GDP).
- Note: “. . .” indicates data not available or not applicable; overall creditors and debtors include economies not covered in the External Sector Report.

### Global Current Account Balances, Gaps, and Trends
- Global excess current account balances (sum of absolute IMF staff–assessed current account gaps) narrowed to 0.9 percent of world GDP in 2021 compared with 1.2 percent of world GDP in 2020.
- Global current account balances widened by ½ percentage point of world GDP to 3.5 percent of world GDP in 2021.
- The absolute sum of current account norms widened to 1.4 percent of GDP in 2021, from 1.1 percent of GDP in 2020.
- Under the previous EBA model, imbalances would have declined to 1.1 percent of world GDP in 2021; the refined model produced a larger narrowing to 0.9 percent of world GDP.
- The improved cyclical adjustment through the new terms-of-trade gap variable contributed to bringing estimated norms closer to actual current account balances.
- IMF staff–assessed current account gaps narrowed for several economies, particularly China, Malaysia, Mexico, Poland, the United Kingdom, and the United States. IMF staff–assessed current account gaps widened for some countries, such as Australia, Belgium, and Singapore.
- Most excess balances in 2021 pertained to advanced economies, higher than the 70 percent share in 2020.
  - Largest contributors to lower-than-warranted (at least 1 percent of GDP below norm) current account balances as share of world GDP: United States, Canada, and Belgium (in descending order).
  - Largest contributors to larger-than-warranted (at least 1 percent of GDP above norm) current account balances: Germany, Australia, Russia, and Sweden (in descending order).
- Current account gaps tend to narrow over time, with adjustments occurring faster in excess deficit economies than in excess surplus economies.

### Outlook and Short-Term Drivers
- Medium-term forecast: Global current account balances are projected to widen further in 2022, driven by an expansion in oil exporters’ surplus and the US deficit, as monetary tightening by the Federal Reserve in response to inflation pressures contributes to the dollar’s appreciation.
- Balances are projected to narrow gradually over 2023–27 as these factors moderate.
- Drivers noted:
  - As pandemic support is withdrawn, governments will increase saving over the medium term, notably in the United States and, to a lesser extent, in some surplus advanced economies.
  - This increase in public saving is expected to offset a projected decline in private saving that peaked during the pandemic.
  - Investment is set to increase globally in the medium term, driven largely by China.

*Source: ch1 - 2. Net Portfolio Inflows (PDF), https://www.imf.org/-/media/files/publications/esr/2022/english/ch1.pdf*

### 1.3 percentage points of GDP is driven by an increase

### ch1 - 1.3 percentage points of GDP is driven by an increase

### Global current account developments
- 1.3 percentage points of GDP is driven by an increase in the cost of energy imports and a collapse in exports to Russia stemming from sanctions related to the war in Ukraine.
- In Japan, the projected narrowing of the current account surplus by 1 percentage point is driven by higher energy costs.
- The current account deficit in the United States is projected to remain elevated at 3.7 percent of GDP, with the decrease in public dissaving countered by a decline in private saving and an increase in investment.

### Emerging market and developing economies
- China’s current account surplus is projected to decline by 0.4 percentage point of GDP to 1.4 percent of GDP in 2022, driven by an increase in investment.
- Commodity exporters: current account balances are projected to increase in 2022, for example:
  - Saudi Arabia: increase by 12.1 percentage points of GDP.
  - Indonesia: increase by 1.9 percentage-points of GDP.
- Commodity importers: the impact is the opposite; for example:
  - India: current account deficit increasing by 1.9 percentage points of GDP.
- Russia: current account surplus projected to increase by 5 percentage points of GDP, driven by import compression, positive terms of trade, and export volumes that have remained relatively resilient so far in the face of sanctions.

### Risks surrounding the external outlook
- Commodity prices:
  - A prolonged war in Ukraine could lead to higher commodity prices for a longer time, widening global current account balances in 2022 beyond the baseline projection and delaying adjustment in subsequent years.
  - Higher oil and gas prices for longer would increase vulnerabilities in importing countries, potentially leading to higher capital outflows, larger borrowing costs, and greater fiscal pressures, with potentially disruptive effects on exchange rates.
  - In food-importing countries, higher prices could increase import costs and fiscal pressures.
- Trade tensions and fragmentation:
  - A wider deterioration in the geopolitical environment could exacerbate trade tensions and supply disruptions, risk trade fragmentation (for example, through “friendshoring”), disrupt global value chains, and reorganize the international monetary system with implications for reserve asset composition, payments systems, and exchange rates.
  - A more fragmented trade system would unambiguously erode welfare gains from globalization, reduce technology transfers, and decrease potential for export-led growth in low-income countries.
- A worsening slowdown in China:
  - A prolonged slowdown in China would affect trading partners directly (largest often in Asia and the Pacific) and have global repercussions by affecting commodities for which China has a large share of global demand.
  - The impact on global balances from lower commodity demand will depend on the net effect on current accounts of commodity importers and exporters.
- Financial tightening:
  - Prospects for continued tightening of monetary policy in the United States and major economies imply further tightening of global financial conditions, leaving open risks for disruptive capital outflows from emerging markets, depreciation of their currencies, and a higher probability of default.
  - The stock of external liabilities at the end of 2021 exceeded reserves for most emerging and developing economies.
  - IMF staff estimates capital flows at risk at the 5 percent level to be 2.3 percent of GDP and the probability of outflows to be about 30 percent in the April 2022 Global Financial Stability Report.
- Fiscal policy path:
  - In the baseline, fiscal policy is projected to contribute to a narrowing of global balances because of faster withdrawal of fiscal support by current account deficit economies.
  - Deviations from the projected fiscal path (for example, additional fiscal expansions by current account deficit economies or a resurgence of COVID-19 requiring additional fiscal support) could hinder narrowing in global balances.
  - A faster-than-expected pace of fiscal consolidation among current account surplus economies would also expand global balances.
- Climate change:
  - Natural disasters can have large effects on current accounts of disaster-prone countries; worsening climate change could make such events more widespread and potentially affect larger countries, with possible effects on global balances.
  - Unbalanced implementation of climate mitigation policies could also widen global balances.

### Policy priorities for promoting external rebalancing
- Multilateral cooperation:
  - Key for addressing the humanitarian crisis, facilitating the green transition (coordinated climate policies can reduce global current account balances and help bring forward net zero emissions), and countering risks of global economic fragmentation by eschewing new barriers to trade.
  - Addressing global food security challenges requires coordinated efforts to support the vulnerable, promote open trade of food and agricultural inputs, and invest in climate-resilient agriculture.
- Global financial safety net and liquidity:
  - Maintaining liquidity in the global financial system, including via the global financial safety net, is essential to help economies manage risks related to tightening global financial conditions and financial system fragmentation.
  - The IMF’s lending programs provide a safety net for countries hit by balance-of-payment shocks.
- Capital flow and exchange rate policies:
  - The IMF’s review of the Institutional View provides guidance on managing capital flow volatility.
  - Exchange rate flexibility can help absorb shocks, but in economies with shallow foreign exchange markets, foreign exchange intervention may be needed to address disorderly conditions.
  - Temporary capital flow management measures may be warranted in imminent crisis circumstances or during capital inflow surges, and preemptive capital flow management measures that are also macro-prudential can mitigate systemic risks from large stocks of unhedged external debt. Such measures should not substitute for needed macroeconomic and structural policies or exchange rate adjustment.
- Tailored country policy recommendations:
  - Economies with weaker-than-warranted external positions:
    - Fiscal consolidation is critical where excess current account deficits partially reflected fiscal deficits above desirable medium-term levels (as in the United States), implemented in a way that prevents long-term scarring and protects spending for infrastructure, health care, and education.
    - Protect vulnerable households from rising oil and food prices.
    - In several emerging markets with weaker-than-warranted positions (for example, Argentina and South Africa), pursue gradual but substantial growth-friendly fiscal consolidation while providing space for infrastructure and social spending and accumulating international reserves.
    - Address structural competitiveness challenges through labor, product market, and other reforms to promote green, digital, and inclusive growth.
  - Economies with stronger-than-warranted external positions:
    - Intensify reforms that encourage investment and discourage excessive private saving; fiscal policies can support these objectives where there is fiscal space and well-anchored inflation expectations.
    - Examples: additional fiscal spending in Germany and the Netherlands to foster investment and deal with repercussions from the war in Ukraine while promoting external rebalancing.
    - Promote public and corporate investment that facilitates greener structural transformation (examples: Poland and Sweden).
    - In some emerging markets, reforms to discourage excessive precautionary saving and support consumption by expanding social safety nets (Malaysia, Thailand) and tackling informality (Thailand) would help reduce excess surpluses.
  - Economies with external positions broadly in line with fundamentals:
    - Continue to address domestic imbalances to prevent excessive external imbalances by accelerating structural reforms (including state-owned enterprise reforms) to boost potential growth and strengthening social protection to reduce household precautionary savings (as in China).
    - In countries with large external liabilities (such as Spain), keeping the current account balance in line with its norm will require fiscal consolidation and higher private savings achieved through productivity gains, continued wage flexibility, addressing labor market duality, and actions to enhance education outcomes and encourage innovation.

### Sectoral saving and post-pandemic dynamics
- Household saving:
  - After increasing sharply during the COVID-19 crisis, household saving has returned to close to pre-pandemic levels in many countries as pandemic-related fiscal support measures expire.
  - Large increases in household balance sheets during the pandemic persist and tend to be distributed unequally, which could have important implications for the future path of external balances.
- Decomposition of saving by institutional sector:
  - The pandemic led to large and opposite changes in saving by households, firms, and the public sector, producing small net changes in national saving and current account balances.
  - Household saving increased significantly due to the fall in consumption from lockdowns and public support aimed at maintaining incomes.
  - Corporate saving remained broadly unchanged as the fall in production was offset by lower employee compensation and higher public support.
  - Public saving fell sharply reflecting fiscal support to firms and households and lower economic activity.
  - As the recovery takes hold, household and public saving have progressively returned to close to pre-pandemic levels, though little drawdown of excess household savings has occurred so far.
- United States vs. Europe:
  - The magnitude of excessive public and private saving is much larger in the United States in percent of GDP.
  - Large increases in fiscal deficits in the United States more than offset increases in private saving, leading to larger current account deficits.

*International Monetary Fund | 2022 — ch1*

### 1. Household Saving

### 1. Household Saving

### Excess household saving, public dissaving, and current account dynamics
- In Europe, higher private saving combined with lower investment more than offset fiscal deficits, leading to increases in the cumulative current account balance.
- Cumulative change series are shown for the United States and Europe across 2020:Q1–2021:Q3, decomposing private saving, public saving, investment, and the current account (figures referenced).
- The change in financial wealth is decomposed into valuation changes and net lending.

### Bolstered household balance sheets and financial wealth
- Accumulated savings explain only part of the increase in wealth; surging equity and housing prices also increased household wealth.
- The increase in aggregate net financial wealth was much larger in the United States than in Europe.
- In the United States, most of the increase in financial wealth was driven by valuation changes (asset price changes).
- In Europe, contributions of net (financial) saving and valuation changes to wealth increases were more balanced.
- Since the beginning of 2021, most increases in net wealth in both the United States and Europe are due to valuation changes, as net financial saving flows have reverted to pre-pandemic levels.
- Recent data for the United States show a drawdown in accumulated saving in early 2022, possibly related to the inflation surge and large valuation losses; further data releases will indicate if this pattern holds more generally across countries.

### Distributional aspects of saving and wealth
- The distribution of pandemic-era wealth gains matters for future spending and external balances.
- U.S. Federal Reserve data show changes in household net wealth by percentile between Q4 2019 and Q4 2021 (COVID-19 period) and between Q4 2014 and Q4 2019 (normal times), normalized by total nationwide personal disposable income for the corresponding period.
- The overall increase in net wealth during COVID-19 was uneven: much accrued to individuals at the top of the distribution. The equity price boom mostly benefited the rich; lockdowns reduced spending on dining and travel (categories larger in wealthier households’ consumption).
- Despite these gains, the distribution of wealth across groups did not change much, with increases in net wealth relatively in line with pre-pandemic shares in the wealth distribution.
- In Europe, estimates combining the distribution of saving across the income distribution with changes in saving and inequality between 2019 and 2020 show the increase in saving is relatively broad based, consistent with relatively muted changes to measured income inequality over that period.
- Figure constructs and notes:
  - In the U.S. figure, categories include Real estate, Corporate equities and shares, Other assets, Liabilities (–), Valuation and other volume changes, Net wealth, and Of which: savings.
  - In the Europe estimate, the distribution of private saving is plotted in percent of national income using constant consumption-to-income ratios; median values for 24 European countries are reported, by income percentile (Top 1, Next 9, Next 40, Bottom 50) for 2019 and 2020.

### External Balance Assessment (EBA) gaps and adjustment speed (Box 1.2)
- The EBA framework produces multilaterally consistent assessments of current account balances and real effective exchange rates; assessments tend to persist over time.
- The box evaluates how and how fast excess external imbalances adjust by relating initial EBA assessments and policy gaps to subsequent adjustments, using a sample of 48 economies and two subperiods (2012–19 and 1987–2019 with refined EBA specification).
- Regression specification: X_{i,t} − X_{i,t−1} = α·Gap_{i,t−1} + ε_{i,t}, where X represents IMF staff current account gaps, EBA gaps, norms, policy gaps, and residuals. When X = Gap and α < 0, the gap follows an exponential process converging toward zero. Half-lives HL(Gap) are defined as the number of years to close the gap by half: HL(Gap) = − ln(2)/ln(1 + α).
- Main empirical findings:
  - All gaps adjust toward zero, but adjustment is slow and asymmetric across countries; regression coefficients α are negative and statistically significant in nearly all cases.
  - Based on 2012–19 and the ESR sample, IMF staff current account gaps take 6.9 years to close by half.
  - EBA gaps show half-lives of 4.7 years (whole period) and 5.7 years (2012–19).
  - Cross-country heterogeneity:
    - Adjustment fastest in deficit emerging economies: 1.5 years (half-life).
    - Adjustment slowest in advanced surplus economies: 6.4 years.
    - During crisis episodes, adjustment is quicker, especially in deficit countries (2.1 years) versus normal times (5.5 years).
    - Adjustment is faster when wage bargaining is decentralized: 3.7 years, versus centralized: 10.8 years.
  - Other factors: economies more financially closed and with less flexible exchange rate regimes tend to adjust faster.
- Drivers of adjustment:
  - EBA gaps adjustment is mainly driven by changes in actual current account or cyclically adjusted current account balances; norm creeping plays only a modest role.
  - Norm creeping is mainly related to the net foreign assets (NFA) variable; persistent external imbalances lead to building large external positions over time.
  - Asymmetry exists between surplus and deficit countries: other fundamentals also affect norms for surplus economies.
- Policy gaps and residuals:
  - Policy gaps tend to adjust more quickly than the EBA current account gap, but asymmetrically across countries and for domestic (rather than external) reasons.
  - Policy gap half-lives: 2.7 years (policy gaps) versus 4.7 years (total EBA current account gaps).
  - Adjustment speed varies by gap type: fiscal gaps (slower when fiscal stance is tighter than warranted), credit gaps (slower after a credit crunch), health gaps (very slow), foreign exchange reserve gaps (extremely rapid).
  - Residuals adjust relatively slowly, with half-lives of 4.5 years when residuals < 0 and 2.2 years when residuals > 0, indicating asymmetry between surplus and deficit countries.
  - Quantitatively, policy gaps contribute only modestly to overall external adjustment compared with residuals. Policy gaps are aligned with overall external gaps in about two-thirds of cases.
  - Closing policy gaps in 2019 would change absolute EBA gaps on average by 0.1 percent of country GDP (reduction in dollar terms differs by gap: closing fiscal gaps reduces overall EBA gap by $150 billion; closing the credit gap increases overall EBA gap by $125 billion).
- Regression evidence tables:
  - Table 1.2.1 reports coefficients for change in EBA CA gap and components; EBA CA Gap (lagged) coefficient = −0.1358*** (p-value 0.000) in column (1).
  - Observations in these regressions: 1,331 (varied by column); R-squared values between 0.004 and 0.073 across specifications.
  - Table 1.2.2 reports that EBA CA Gap (lagged) coefficient = −0.1251*** (p-value 0.000) in column (1); change in policy gaps when aligned has coefficient −0.0509*** (p-value 0.000) and when nonaligned 0.1185*** (p-value 0.000).
  - Observations in Table 1.2.2: 1,331 (columns 1–3), 849 (aligned), 482 (nonaligned); R-squared between 0.002 and 0.087.
- Interpretation and policy implications:
  - Adjustment of external imbalances is real but gradual; policymakers should expect slow convergence of current account gaps toward norms.
  - Domestic policy-driven closure of policy gaps tends to occur for domestic reasons and only contributes to external rebalancing when policy gaps and current account gaps are aligned.
  - Faster adjustment in crisis episodes suggests that crises can accelerate external rebalancing, particularly for deficit economies.

*Box 1.1 and Box 1.2 prepared by Cian Allen and Cyril Rebillard; figures and tables based on Eurostat; OECD; Federal Reserve; Laeven and Valencia 2020; OECD/AIAS; IMF staff calculations.*

### Box 1.2 (continued)

### Box 1.2 (continued)

### Climate change, natural disasters, and the external sector
- Climate change is expected to increase the intensity and frequency of extreme events (IPCC 2014), worsening the reach of natural disasters and their implications for the external sector.
- Natural disasters tend to widen the current account deficit as countries finance reconstruction through increased investment.
- More intense and frequent disasters will inflict greater economic losses and damage to physical infrastructure, amplifying the above channel.
- Investing in ex ante adaptation and maintaining a contingency fund can soften the impact by reducing reliance on external debt and smoothing recovery.

### Empirical background (disaster-prone country sample)
- Data source: Emergency Events Database; sample: 31 economies classified as disaster-prone (top quartile of probability of disaster per 1,000 square kilometers).
- Sample economies (31): Albania, Belize, Burundi, Cabo Verde, Comoros, Costa Rica, Dominica, the Dominican Republic, El Salvador, Eswatini, Fiji, The Gambia, Grenada, Haiti, Jamaica, Kiribati, Lebanon, former Yugoslav Republic of Macedonia, Maldives, Mauritius, Micronesia, Moldova, Montenegro, Rwanda, Samoa, the Solomon Islands, Sri Lanka, St. Lucia, Timor-Leste, Tonga, and Vanuatu. Data cover 1950–2015.
- Local-projections result: After the initial shock, the current account (as percent of GDP) deteriorates up to 2 percentage points.
- Mechanism: Disaster shocks trigger an increase in investment to rebuild capital stock; imports and GDP also increase due to imports of intermediates and investment goods for reconstruction.

### Model framework and calibration
- Framework: Dynamic general equilibrium model DIGNAD (Debt, Investment, Growth, and Natural Disasters model; Marto, Papageorgiou, and Klyuev 2018), calibrated to a typical disaster-prone country (Cantelmo, Melina, and Papageorgiou 2019).
- Model features: financially constrained households; two production sectors (nontraded goods and traded goods); government with access to various fiscal instruments, external debt, and a contingency fund.
- Assumed disaster losses in simulations: total economic losses equivalent to 20 percent of GDP (stemming largely from destroyed capital stock).
- GDP impact in baseline: reduces GDP by 6.9 percent in the first two years, then recovers slowly.
- Baseline current account impact: external debt increases to fund reconstruction; capital inflows trigger real exchange rate appreciation and a 2 percentage point increase in the current account deficit after the disaster, remaining elevated for 10 years after the initial impact.

### Scenario: Ex ante adaptation only
- Policy: ex ante investment in adaptation infrastructure (climate-proofed roads, seawalls, etc.) amounting to 2.5 percent of GDP cumulatively over the five years before the disaster, funded by external borrowing.
- Pre-disaster effect: pre-disaster appreciation of the real exchange rate triggers an increase in the current account deficit of 0.6 percentage point.
- Post-disaster GDP effect: GDP falls by 2.9 percent within two years of the disaster (lower than baseline 6.9 percent).
- Effect on current account and exchange rate: the increased share of adaptation infrastructure dampens reconstruction burden, dampens real appreciation and the worsening of the current account deficit, smoothing it more over time.

### Scenario: Adaptation plus contingency fund
- Policy mix: ex ante investment in adaptation infrastructure and investment in an external disaster contingency fund, each amounting to 1.25 percent of GDP cumulatively over the five years before the disaster (sum equals adaptation-only 2.5 percent of GDP but split equally).
- Post-disaster financing: contingency fund is used to finance reconstruction rather than external debt.
- Pre-disaster effect: current account deficit worsens by only 0.4 percentage point before the disaster (domestic adaptation investment lower than adaptation-only scenario).
- Post-disaster effects: lower adaptation leads to greater damage, requiring more reconstruction funds; withdrawals from the contingency fund and larger financing needs trigger a larger real exchange rate appreciation than under adaptation-only, worsening the current account deficit by 1.1 percentage points after the disaster.

### Policy implications on resilience and external vulnerabilities
- Building resilience through structural (resilient public capital) and financial protection (contingency funds) can address external sector vulnerabilities exacerbated by climate change.
- Appropriate ex ante adaptation policy depends on country context and should be based on a wider cost-benefit analysis (Bellon and Massetti 2022; Aligishiev, Bellon, and Massetti 2022).
- Resilient public capital:
  - Softens the impact of natural disasters on the economy.
  - Smoothes current account fluctuations by minimizing need for externally funded post-disaster reconstruction.
- Financial protection:
  - Provides resources for immediate relief and reconstruction after a natural disaster.
  - Improves the government’s net asset position.

### Trade restrictions and nontariff barriers (NTBs)
- A novel index of trade restrictions covering tariffs and NTBs for 157 countries (Estefania-Flores and others 2022) was compiled using a narrative approach drawing on the IMF’s Annual Report on Exchange Arrangements and Exchange Restrictions.
- The NTBs index (this box’s focus) varies from 0 to 20, with lower levels indicating fewer trade restrictions. (Note in source: full index varies 0 to 22 when tariff components included.)
- Historical patterns:
  - NTB index was high across income levels in the 1960s but has declined significantly in advanced economies.
  - Restrictions remain high in emerging markets and low-income countries, especially import and export restrictions; many large emerging markets such as India and South Africa have high NTBs.
- Econometric findings (local projection estimates):
  - A two standard deviation increase in the NTB index is associated with an almost 4 percent decline in import volumes after five years, and export volumes fall by about 3 percent.
  - On net, trade balance and current account balance are unchanged in the medium term.
  - A two standard deviation increase in the NTB index is associated with a reduction in GDP growth of about 1.7 percent five years after the reform.
  - Output losses are driven by a decrease in investment and productivity rather than by net exports, implying less efficient resource allocation and reversal of benefits from specialization and technology transfers.
- Additional effect: imposing NTBs curtails participation in global value chains because costs cascade with each border crossing.

### Data notes and figures referenced
- Figures referenced: Figure 1.3.1 (Effects of a Disaster Shock on the Current Account, Percent of GDP), Figure 1.3.2 (Impact of Natural Disaster — deviations from baseline: 1. Impact on Current Account (Percent); 2. Impact on GDP (Percent)), Figure 1.4.1 (Nontariff Barriers Index, Simple average), Figure 1.4.2 (Effect of an Increase in NTBs, Percent).
- Model simulations and figures: source noted as IMF staff estimates and DIGNAD model simulations; x-axis in figures: units are years where t = 0 denotes the year of the disaster; dashed lines indicate 90 percent confidence intervals.

*Prepared by Zamid Aligishiev, Luciana Juvenal, and Cian Ruane (Box 1.2); Julia Estefania-Flores and Siddharth Kothari (Box 1.4). Source: IMF staff estimates and cited studies.*

### Annex Table 1.1.3.

### Annex Table 1.1.3. External Sector Report Economies: Summary of IMF Staff–Assessed Current Account Gaps and IMF Staff Adjustments, 2021 (Percent of GDP)

### Key variables and columns reported
- Assessment 2021: qualitative overall external position assessment.
- Actual CA Balance [A]: reported current account balance (percent of GDP).
- Cycl. Adj. CA Balance [B]: cyclically adjusted current account balance (percent of GDP).
- EBA CA Norm [C]: External Balance Assessment current account norm (percent of GDP).
- EBA CA Gap [1] [D = B – C]: difference between cyclically adjusted CA and EBA norm (percent of GDP).
- IMF Staff-Assessed CA Gap [2] [E = D + F]: midpoint of IMF staff-assessed CA gap after adjustments (percent of GDP).
- IMF Staff Adjustments [3] [F = G + H − I]: total adjustments applied by IMF staff (percent of GDP), decomposed into:
  - Covid-19 [G]
  - CA [H]
  - Norm [I]
- Comments on Non–COVID-19-related Adjustments: country-specific rationale for non–COVID-19 adjustments.

### Country-level summary (values preserved exactly as in the source)
- Argentina — Assessment: Weaker
  - Actual CA Balance [A]: 1.4
  - Cycl. Adj. CA Balance [B]: 0.5
  - EBA CA Norm [C]: 0.2
  - EBA CA Gap [D]: 0.3
  - IMF Staff-Assessed CA Gap [E]: –0.5
  - IMF Staff Adjustments [F]: –0.8
    - Covid-19 [G]: 0.0
    - CA [H]: 0.0
    - Norm [I]: 0.8
  - Comments: NIIP/financing risk considerations

- Australia — Assessment: Stronger
  - Actual CA Balance [A]: 3.5
  - Cycl. Adj. CA Balance [B]: 1.7
  - EBA CA Norm [C]: –0.9
  - EBA CA Gap [D]: 2.6
  - IMF Staff-Assessed CA Gap [E]: 2.7
  - IMF Staff Adjustments [F]: 0.2
    - Covid-19 [G]: 0.2
    - CA [H]: 0.0
    - Norm [I]: 0.0

- Belgium — Assessment: Weaker
  - Actual CA Balance [A]: –0.4
  - Cycl. Adj. CA Balance [B]: 0.0
  - EBA CA Norm [C]: 3.1
  - EBA CA Gap [D]: –3.1
  - IMF Staff-Assessed CA Gap [E]: –3.3
  - IMF Staff Adjustments [F]: –0.2
    - Covid-19 [G]: –0.2
    - CA [H]: 0.0
    - Norm [I]: 0.0

- Brazil — Assessment: Broadly in line
  - Actual CA Balance [A]: –1.7
  - Cycl. Adj. CA Balance [B]: –2.8
  - EBA CA Norm [C]: –1.6
  - EBA CA Gap [D]: –1.2
  - IMF Staff-Assessed CA Gap [E]: –0.4
  - IMF Staff Adjustments [F]: 0.8
    - Covid-19 [G]: –0.2
    - CA [H]: 1.0
    - Norm [I]: 0.0
  - Comments: Severe drought + end of Repetro

- Canada — Assessment: Moderately weaker
  - Actual CA Balance [A]: 0.0
  - Cycl. Adj. CA Balance [B]: –0.4
  - EBA CA Norm [C]: 2.6
  - EBA CA Gap [D]: –3.0
  - IMF Staff-Assessed CA Gap [E]: –1.5
  - IMF Staff Adjustments [F]: 1.6
    - Covid-19 [G]: 0.1
    - CA [H]: 1.5
    - Norm [I]: 0.0
  - Comments: Measurement biases

- China — Assessment: Broadly in line
  - Actual CA Balance [A]: 1.8
  - Cycl. Adj. CA Balance [B]: 2.2
  - EBA CA Norm [C]: 0.8
  - EBA CA Gap [D]: 1.4
  - IMF Staff-Assessed CA Gap [E]: –0.3
  - IMF Staff Adjustments [F]: –1.6
    - Covid-19 [G]: –1.6
    - CA [H]: 0.0
    - Norm [I]: 0.0

- Euro Area (note on construction) — Assessment: Moderately stronger
  - Actual CA Balance [A]: 2.4
  - Cycl. Adj. CA Balance [B]: 2.3
  - EBA CA Norm [C]: 0.6
  - EBA CA Gap [D]: 1.7
  - IMF Staff-Assessed CA Gap [E]: 1.2
  - IMF Staff Adjustments [F]: –0.5
    - Covid-19 [G]: 0.1
    - CA [H]: –0.4
    - Norm [I]: 0.2
  - Comments: Country-specific adjustments

- France — Assessment: Broadly in line
  - Actual CA Balance [A]: 0.4
  - Cycl. Adj. CA Balance [B]: 0.2
  - EBA CA Norm [C]: 0.3
  - EBA CA Gap [D]: –0.1
  - IMF Staff-Assessed CA Gap [E]: –0.1
  - IMF Staff Adjustments [F]: 0.0
    - Covid-19 [G]: 0.0
    - CA [H]: 0.0
    - Norm [I]: 0.0

- Germany — Assessment: Stronger
  - Actual CA Balance [A]: 7.4
  - Cycl. Adj. CA Balance [B]: 7.6
  - EBA CA Norm [C]: 3.3
  - EBA CA Gap [D]: 4.3
  - IMF Staff-Assessed CA Gap [E]: 3.7
  - IMF Staff Adjustments [F]: –0.6
    - Covid-19 [G]: –0.6
    - CA [H]: 0.0
    - Norm [I]: 0.0

- India — Assessment: Broadly in line
  - Actual CA Balance [A]: –1.2
  - Cycl. Adj. CA Balance [B]: –1.6
  - EBA CA Norm [C]: –1.9
  - EBA CA Gap [D]: 0.3
  - IMF Staff-Assessed CA Gap [E]: 1.0
  - IMF Staff Adjustments [F]: 0.7
    - Covid-19 [G]: 0.7
    - CA [H]: 0.0
    - Norm [I]: 0.0

- Indonesia — Assessment: Broadly in line
  - Actual CA Balance [A]: 0.3
  - Cycl. Adj. CA Balance [B]: –1.5
  - EBA CA Norm [C]: –0.8
  - EBA CA Gap [D]: –0.7
  - IMF Staff-Assessed CA Gap [E]: 0.2
  - IMF Staff Adjustments [F]: 1.0
    - Covid-19 [G]: 0.6
    - CA [H]: 0.0
    - Norm [I]: –0.4
  - Comments: Demographics (high mortality risk)

- Italy — Assessment: Broadly in line
  - Actual CA Balance [A]: 2.4
  - Cycl. Adj. CA Balance [B]: 2.2
  - EBA CA Norm [C]: 3.4
  - EBA CA Gap [D]: –1.2
  - IMF Staff-Assessed CA Gap [E]: –0.9
  - IMF Staff Adjustments [F]: 0.3
    - Covid-19 [G]: 0.3
    - CA [H]: 0.0
    - Norm [I]: 0.0

- Japan — Assessment: Broadly in line
  - Actual CA Balance [A]: 2.9
  - Cycl. Adj. CA Balance [B]: 2.9
  - EBA CA Norm [C]: 3.9
  - EBA CA Gap [D]: –0.9
  - IMF Staff-Assessed CA Gap [E]: –0.5
  - IMF Staff Adjustments [F]: 0.4
    - Covid-19 [G]: 0.4
    - CA [H]: 0.0
    - Norm [I]: 0.0

- Korea — Assessment: Broadly in line
  - Actual CA Balance [A]: 4.9
  - Cycl. Adj. CA Balance [B]: 5.6
  - EBA CA Norm [C]: 5.0
  - EBA CA Gap [D]: 0.6
  - IMF Staff-Assessed CA Gap [E]: –0.3
  - IMF Staff Adjustments [F]: –0.9
    - Covid-19 [G]: –0.9
    - CA [H]: 0.0
    - Norm [I]: 0.0

- Malaysia — Assessment: Moderately stronger
  - Actual CA Balance [A]: 3.8
  - Cycl. Adj. CA Balance [B]: 2.6
  - EBA CA Norm [C]: –0.1
  - EBA CA Gap [D]: 2.7
  - IMF Staff-Assessed CA Gap [E]: 1.8
  - IMF Staff Adjustments [F]: –0.8
    - Covid-19 [G]: –0.8
    - CA [H]: 0.0
    - Norm [I]: 0.0

- Mexico — Assessment: Broadly in line
  - Actual CA Balance [A]: –0.4
  - Cycl. Adj. CA Balance [B]: –1.5
  - EBA CA Norm [C]: –1.2
  - EBA CA Gap [D]: –0.2
  - IMF Staff-Assessed CA Gap [E]: –0.2
  - IMF Staff Adjustments [F]: 0.1
    - Covid-19 [G]: 0.1
    - CA [H]: 0.0
    - Norm [I]: 0.0

- The Netherlands — Assessment: Stronger
  - Actual CA Balance [A]: 9.0
  - Cycl. Adj. CA Balance [B]: 9.2
  - EBA CA Norm [C]: 5.1
  - EBA CA Gap [D]: 4.1
  - IMF Staff-Assessed CA Gap [E]: 2.0
  - IMF Staff Adjustments [F]: –2.1
    - Covid-19 [G]: –0.4
    - CA [H]: –1.7
    - Norm [I]: 0.0
  - Comments: Measurement biases

- Poland — Assessment: Moderately stronger
  - Actual CA Balance [A]: –0.6
  - Cycl. Adj. CA Balance [B]: –0.3
  - EBA CA Norm [C]: –2.4
  - EBA CA Gap [D]: 2.1
  - IMF Staff-Assessed CA Gap [E]: 1.4
  - IMF Staff Adjustments [F]: –0.6
    - Covid-19 [G]: –0.6
    - CA [H]: 0.0
    - Norm [I]: 0.0

- Russia — Assessment: Stronger
  - Actual CA Balance [A]: 6.9
  - Cycl. Adj. CA Balance [B]: 7.1
  - EBA CA Norm [C]: 4.4
  - EBA CA Gap [D]: 2.6
  - IMF Staff-Assessed CA Gap [E]: 2.1
  - IMF Staff Adjustments [F]: –0.6
    - Covid-19 [G]: –0.6
    - CA [H]: 0.0
    - Norm [I]: 0.0

- South Africa — Assessment: Moderately weaker
  - Actual CA Balance [A]: 3.6
  - Cycl. Adj. CA Balance [B]: 1.3
  - EBA CA Norm [C]: 2.6
  - EBA CA Gap [D]: –1.3
  - IMF Staff-Assessed CA Gap [E]: –1.7
  - IMF Staff Adjustments [F]: –0.5
    - Covid-19 [G]: –2.7
    - CA [H]: 1.6
    - Norm [I]: –0.6
  - Comments: SACU transfers and measurement biases (CA); demographics (high mortality risk, norm)

- Spain — Assessment: Broadly in line
  - Actual CA Balance [A]: 0.9
  - Cycl. Adj. CA Balance [B]: –0.1
  - EBA CA Norm [C]: 0.0
  - EBA CA Gap [D]: –0.1
  - IMF Staff-Assessed CA Gap [E]: –0.1
  - IMF Staff Adjustments [F]: 0.0
    - Covid-19 [G]: 1.7
    - CA [H]: 0.0
    - Norm [I]: 1.7
  - Comments: NIIP/financing risk considerations

- Sweden — Assessment: Stronger
  - Actual CA Balance [A]: 5.5
  - Cycl. Adj. CA Balance [B]: 5.3
  - EBA CA Norm [C]: 1.2
  - EBA CA Gap [D]: 4.1
  - IMF Staff-Assessed CA Gap [E]: 3.6
  - IMF Staff Adjustments [F]: –0.5
    - Covid-19 [G]: –0.5
    - CA [H]: 0.0
    - Norm [I]: 0.0

- Switzerland — Assessment: Broadly in line
  - Actual CA Balance [A]: 9.3
  - Cycl. Adj. CA Balance [B]: 9.9
  - EBA CA Norm [C]: 6.8
  - EBA CA Gap [D]: 3.1
  - IMF Staff-Assessed CA Gap [E]: –0.9
  - IMF Staff Adjustments [F]: –4.0
    - Covid-19 [G]: –0.6
    - CA [H]: –3.4
    - Norm [I]: 0.0
  - Comments: Measurement biases

- Thailand — Assessment: Moderately stronger
  - Actual CA Balance [A]: –2.2
  - Cycl. Adj. CA Balance [B]: –2.8
  - EBA CA Norm [C]: 1.4
  - EBA CA Gap [D]: –4.2
  - IMF Staff-Assessed CA Gap [E]: 1.4
  - IMF Staff Adjustments [F]: 5.6
    - Covid-19 [G]: 5.6
    - CA [H]: 0.0
    - Norm [I]: 0.0

- Türkiye — Assessment: Broadly in line
  - Actual CA Balance [A]: –1.7
  - Cycl. Adj. CA Balance [B]: –0.6
  - EBA CA Norm [C]: –0.8
  - EBA CA Gap [D]: 0.2
  - IMF Staff-Assessed CA Gap [E]: 0.0
  - IMF Staff Adjustments [F]: –0.2
    - Covid-19 [G]: –0.2
    - CA [H]: 0.0
    - Norm [I]: 0.0

- United Kingdom — Assessment: Broadly in line
  - Actual CA Balance [A]: –2.6
  - Cycl. Adj. CA Balance [B]: –2.0
  - EBA CA Norm [C]: –0.7
  - EBA CA Gap [D]: –1.3
  - IMF Staff-Assessed CA Gap [E]: –0.1
  - IMF Staff Adjustments [F]: 1.2
    - Covid-19 [G]: 0.3
    - CA [H]: 0.9
    - Norm [I]: 0.0
  - Comments: Measurement biases, Brexit

- United States — Assessment: Moderately weaker
  - Actual CA Balance [A]: –3.6
  - Cycl. Adj. CA Balance [B]: –3.2
  - EBA CA Norm [C]: –1.3
  - EBA CA Gap [D]: –1.9
  - IMF Staff-Assessed CA Gap [E]: –1.1
  - IMF Staff Adjustments [F]: 0.8
    - Covid-19 [G]: 0.8
    - CA [H]: 0.0
    - Norm [I]: 0.0

- Hong Kong SAR — Assessment: Broadly in line
  - Actual CA Balance [A]: 11.3
  - Cycl. Adj. CA Balance [B]: 10.7
  - EBA CA Norm [C]: . . .
  - EBA CA Gap [D]: . . .
  - IMF Staff-Assessed CA Gap [E]: 1.0
  - IMF Staff Adjustments [F]: –0.5
    - Covid-19 [G]: –0.5
    - CA [H]: 0.0
    - Norm [I]: 0.0

- Singapore — Assessment: Substantially stronger
  - Actual CA Balance [A]: 18.1
  - Cycl. Adj. CA Balance [B]: 18.8
  - EBA CA Norm [C]: . . .
  - EBA CA Gap [D]: . . .
  - IMF Staff-Assessed CA Gap [E]: 5.2
  - IMF Staff Adjustments [F]: –1.4
    - Covid-19 [G]: –1.4
    - CA [H]: 0.0
    - Norm [I]: 0.0

- Saudi Arabia — Assessment: Broadly in line
  - Actual CA Balance [A]: 5.3
  - Cycl. Adj. CA Balance [B]: 5.4
  - EBA CA Norm [C]: . . .
  - EBA CA Gap [D]: . . .
  - IMF Staff-Assessed CA Gap [E]: –1.0
  - IMF Staff Adjustments [F]: 1.1
    - Covid-19 [G]: 1.1
    - CA [H]: 0.0
    - Norm [I]: 0.0

### Aggregate metrics and notes
- Absolute sum of excess surpluses and deficits [5]: 1.6 (percent of aggregate GDP)
- Discrepancy for all EBA/ESR economies [6]: –0.04 (percent of aggregate GDP)
  - Of which: ESR economies: –0.04
  - Of which: Non-ESR economies: 0.00
- Source and notes:
  - Source: IMF staff estimates.
  - Note: CA = current account; Cycl. Adj. = cyclically adjusted; EBA = external balance assessment; ESR = External Sector Report; NIIP = net international investment position; SACU = Southern African Customs Union. “. . .” indicates that data are not available or not applicable.
  - Footnotes preserve that figures may not add up due to rounding effects; IMF staff-assessed gaps refer to midpoints; total IMF staff adjustments include rounding; EBA euro area norm construction and aggregation notes are reported in the source.

*Source: IMF staff estimates (Annex Table 1.1.3).*

### References

### References

### Exchange rates, external balance, and capital flows
- Abiad, Abdul, Prakash Kannan, and Jungjin Lee. 2009. “Evaluating Historical CGER Assessments: How Well Have They Predicted Subsequent Exchange Rate Movements?” IMF Working Paper 09/32, International Monetary Fund, Washington, DC.
- Adler, Gustavo, Kyun Suk Chang, Rui C. Mano, and Yuting Shao. 2021. “Foreign Exchange Intervention: A Dataset of Public Data and Proxies.” IMF Working Paper 21/047, International Monetary Fund, Washington DC.
- Cubeddu, Luis, Signe Krogstrup, Gustavo Adler, Pau Rabanal, Mai Chi Dao, Swarnali Ahmed Hannan, Luciana Juvenal, et al. 2019. “The External Balance Assessment Methodology: 2018 Update.” IMF Working Paper 19/65, International Monetary Fund, Washington, DC.
- Lane, Philip R., and Gian Maria Milesi-Ferretti. 2012. “External Adjustment and the Global Crisis.” Journal of International Economics 88 (2): 252–65.
- International Monetary Fund (IMF). 2015. “Assessing Reserve Adequacy–Specific Proposals.” IMF Policy Paper, Washington, DC.
- International Monetary Fund (IMF). 2022. “Review of the Institutional View on the Liberalization and Management of Capital Flows.” IMF Policy Paper 2022/008, International Monetary Fund, Washington, DC.
- Perks, Michael, Yudong Rao, Jongsoon Shin, and Kiichi Tokuoka, 2021. “Evolution of Bilateral Swap Lines.” IMF Working Paper 21/210, International Monetary Fund, Washington, DC.
- Yeşin, Pinar. 2016. “Exchange Rate Predictability and State-of-the-Art Models.” SNB Working Paper 2/2016, Swiss National Bank, Zurich.
- Jordà, Òscar. 2005. “Estimation and Inference of Impulse Responses by Local Projections.” American Economic Review 95 (1): 161–82.
- Rogoff, Kenneth. 1996. “The Purchasing Power Parity Puzzle.” Journal of Economic Literature 34 (2): 647–68.

### Trade, protection, and procurement
- Estefania-Flores, Julia, Davide Furceri, Swarnali Hannan, Jonathan D. Ostry, and Andrew K. Rose. 2022. “Measurement of Aggregate Trade Restrictions and Their Economic Effects.” IMF Working Paper 2022/1, International Monetary Fund, Washington, DC.
- Evenett, Simon. 2021. “The Trade and Government Procurement Policy Nexus: Before and after the COVID-19 Pandemic.” In Public Procurement in (a) Crisis: Global Lessons from the COVID-19 Pandemic, edited by Sue Arrowsmith, Luke R. A. Butler, Annamaria La Chimia, and Christopher Yukins. Oxford: Hart Publishing.
- Goldberg, Pinelopi K., and Nina Pavcnik. 2016. “The Effects of Trade Policy.” NBER Working Paper 21957, National Bureau of Economic Research, Cambridge, MA.
- Coutinho, Leonor, Alessandro Turrini, and Stefan Zeugner. 2022. “Assessing the Euro Area Current Account.” Journal of International Money and Finance 121 (March): 102512.

### Fiscal policy, external shocks, and macro-fiscal resilience
- Aggarwal, Rishabh, Adrien Auclert, Matthew Rognlie, and Ludwig Straub. 2022. “Excess Savings and Twin Deficits: The Transmission of Fiscal Stimulus in Open Economies.” In NBER Macroeconomics Annual 2022, vol. 37, edited by Martin Eichenbaum, Erik Hurst, and Valerie A. Ramey. Cambridge, MA: National Bureau of Economic Research.
- Aligishiev, Zamid, Matthieu Bellon, and Emanuele Massetti. 2022. “Macro-fiscal Implications of Adaptation to Climate Change.” IMF Staff Climate Note 2022/002, International Monetary Fund, Washington, DC.
- Bellon, Matthieu, and Emanuele Massetti. 2022. “Economic Principles for Integrating Adaptation to Climate Change into Fiscal Policy.” IMF Staff Climate Note 2022/001, International Monetary Fund, Washington, DC.
- Cantelmo, Alessandro, Giovanni Melina, and Chris Papageorgiou. 2019. “Macroeconomic Outcomes in Disaster Prone Countries.” IMF Working Paper 19/217, International Monetary Fund, Washington, DC.
- Marto, Ricardo, Chris Papageorgiou, and Vladimir Klyuev. 2018. “Building Resilience to Natural Disasters: An Application to Small Developing States.” Journal of Development Economics 135: 574–86.

### Inequality, savings, and distributional issues
- Allen, Cian, Christina Kolerus, and Ying Xu. 2022. “Saving across the Income Distribution: An International Perspective.” Unpublished. International Monetary Fund, Washington, DC.
- Blanchet, Thomas, Emmanuel Saez, and Gabriel Zucman. 2022. “Real-Time Inequality.” Unpublished. University of California, Berkeley, Berkeley, CA.
- Chancel, Lucas, Thomas Piketty, Emmanuel Saez, and Gabriel Zucman, eds. Forthcoming. World Inequality Report 2022. Cambridge, MA: Harvard University Press.
- Mian, Atif, Ludwig Straub, and Amir Sufi. 2021. “The Saving Glut of the Rich.” Working Paper 2021-70, Economics Department, Princeton University, Princeton, NJ.

### Financial safety nets, banking crises, and systemic risks
- Denbee, Edd, Carsten Jung, and Francesco PaternÒ. 2016. “Stitching Together the Global Financial Safety Net.” Financial Stability Paper No. 36, Bank of England, London.
- Laeven, Luc, and Fabian Valencia. 2020. “Systemic Banking Crises Database II.” IMF Economic Review 68 (2): 307–61.

### Labor markets and wage bargaining
- Nieminen, Mika, Kari Heimonen, and Timo Tohmo. 2019. “Current Accounts and Coordination of Wage Bargaining.” Open Economies Review 30 (2): 319–41.

### Climate change assessment
- Intergovernmental Panel on Climate Change (IPCC). 2014. Climate Change 2014: Impacts, Adaptation, and Vulnerability. New York: Cambridge University Press.

*Source: ch1 - References*

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_Source: https://www.imf.org/-/media/files/publications/esr/2022/english/ch1.pdf_