External Sector Report

Current accounts in major economies diverged significantly in 2024, widening global current account balances by 0.6 percentage points of world GDP. This widening, driven by domestic macro imbalances, represents a sizable reversal from the post-pandemic narrowing. Staff assessment suggests that excess current account balances account for about two-thirds of the widening in global current account balances. The assessed increase in excess current account balances is the largest in a decade, with major economies—China, the United States and the euro area—driving the increase. Such rapid and globally sizable increase in excess current account balances in major economies can generate significant negative cross-border spillovers. In 2025 and over the medium term, a delay in macroeconomic adjustments to correct the post-pandemic domestic macro imbalances could result in continued current account divergence in major economies, while addressing domestic imbalances could bring about a convergence of major current account balances.

Over several decades, the international monetary system (IMS) has remained broadly stable and centered on the US dollar, despite momentous global changes. This stability has been accompanied by rising asymmetries between the global economic and monetary system as economies deepened specialization in trade or finance, while the US dollar is used as the primary global currency across various areas. However, recent geopolitical and economic developments could weaken this stability, warranting a recurrent monitoring of the evolving system. This chapter—the first of periodic monitoring of the IMS—documents historical developments, provides some conceptual foundations, and proposes indices to track key trends in the IMS.

The individual economy assessments use a wide range of methods to form an integrated and multilaterally consistent view of economies’ external sector positions. These methods are grounded in the latest vintage of the External Balance Assessment, developed by the IMF to estimate desired current account balances and real exchange rates. Model estimates and associated discussions on policy distortions are complemented by a holistic view of other external indicators. The policy discussion in the individual economy assessments highlights policies and reforms that contribute to convergence toward (or maintenance of) external balance.ms.