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Economics explained


Balance of payments

Current account deficit

Current account deficit

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A country is said to have a current account deficit if its financial outflows are greater than its financial inflows. Hence, the current account has a negative balance .

Causes of a current account deficit

A deficit on the current account can occur due to a combination of two factors:

Lower demand for exports

This could be caused by

a decline in competitiveness.
an economic recession in foreign markets
a higher exchange rate

Increased demand for imports

This can be caused by

domestic inflation
cheaper or better quality imports
a growing domestic economy

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