The Current Account Balance is the difference between
the savings of a country and it's investments. Savings refers to
the sum total of the import values of all goods and services and
the total income from investments overseas. Investments mean the
amount invested in the export of the country's goods and services.
All these measurements are based on the country's currency. It
follows the flow of money, trades and investments coming into and
out of the country. It's one of the three accounts that make up a
country's Balance of Payments; the other two are the Financial
Account and the Capital Account.
If the Current Account Balance is positive (known as
Current Account Surplus), it means that what is coming into the
country is significantly bigger than what is going out of the
country - which is a good thing. A negative Current Account Balance
(also called Current Account Deficit) means that the country is
spending far more than what it is gaining - which is then a
disadvantage. Current Account Surplus points to the portion of the
country's savings abroad. Meanwhile, Current Account Deficit
symbolises that a part of the country's investments is the savings
of foreign investors.
Seeing too many Current Account Deficits can mean the
eventual depreciation of the country's currency. This is because
the country would be using its monetary means to pay trades, stocks
and investments in other countries, and in those countries'
currencies.
Current Account Balance then is a useful indicator of
the country's standing with the overall international market. Thus,
it's a good way to gauge the current economic condition in the
country. It's a vital report as it sheds light on what could be
expected in the future, in terms of foreign currency exchanges and
in how the country's economy is behaving with respect to the
international market.