macroeconomicsCan you explain the difference between ‘Current-Account-Balance’ and ‘Budget Balance’ columns shown in ‘Economic Data’ table in the end of the Economist magazine’s each issue?
The current account balance shows the annual balance of international trade that a country has with its trading partners, plus its factor income (interest in - interest out) and its transfer payments (development aid in - development aid out). So a country that exports €100bn more than it imports, and receives £10bn in interest income than it pays out, and gives €30bn in foreign aid, will have a current account surplus of €80bn (=€100bn + €10bn - €30bn).
The budget balance shows the difference between the government’s annual revenue and its annual expenditure: so in country where the government revenues (taxes and the like) are €50bn less than its expenditure (all spending - investment, consumption, the lot), then it will have a budget deficit of €50bn.
The figures might be presented as absolute numbers in the country’s own currency; as a percentage of the country’s GDP; or in a foreign currency (based possibly on a spot exchange rate, an annual average exchange rate, or on purchasing-power-parity). And they might be presented as national totals, or possibly per capita.
Briefly, “budget balance” is a domestic balance; the relationship between a government’s internal revenues and spending. “Current account balance” is an international balance, between one country and the rest of the world.
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