- The IMF estimates that 40% of global current account deficits and surpluses were excessive in 2019.
- These were concentrated in advanced economies.
- Policy responses in the short-term should focus on economic lifelines and the economic recovery from COVID-19.
- In the medium term, policies should work to reduce excess imbalances.
The world entered the COVID-19 pandemic with persistent, pre-existing external imbalances. The crisis has caused a sharp reduction in trade and significant movements in exchange rates but limited reduction in global current account deficits and surpluses. The outlook remains highly uncertain as the risks of new waves of contagion, capital flow reversals, and a further decline in global trade still loom large on the horizon.
Our new External Sector Report shows that overall current account deficits and surpluses in 2019 were just below 3 percent of world GDP, slightly less than a year earlier. Our latest forecasts for 2020 imply only a further narrowing by some 0.3 percent of world GDP, a more modest decline than after the global financial crisis 10 years ago.
Source: World Economic Forum