Current Account - Surplus/Deficit

Current Account is composed of three entities
Current Account = Balance of Trade + Net Payments + Net Transfers

Balance of Trade = Exports - Imports
Net Payments = Money received from investments abroad - remittances
Net Transfers = International Aid (ignore)


Current Account deficit(X) can be said as the function of exchange rate(p), domestin GDP (d), foreign GDP (f). Thus X=f(p,d,f)

P (exchange rate) = current account improves (goes in surplus) if the currency depreciates. This helps in boosting exports.

Domestic GDP = CA improves if the domestic GDP falls. This reduces demand for foreign goods. So less imports.

Foreign GDP = An increase in foreign GDP helps boost domestic exports and improves current account