The current account deficit is a measurement of a country’s trade, where the value of the goods and services it imports exceeds the value of the products it exports. The current account includes net income, such as interest and dividends, and transfers, such as foreign aid, although these components make up only a small percentage of the total current account. The current account represents a country’s foreign transactions and, like the capital account, is a component of a country’s balance of payments (BOP).

In brief:

• A current account deficit indicates that a country is importing more than it is exporting.

• Emerging economies often run surpluses and developed countries tend to run deficits.

• A current account deficit is not always detrimental to a nation’s economy—external debt may be used to finance lucrative investments.