Hello!
So, a current accounr deflict is when a country imports more goods or services than it exports.
How does this happen?
There are many causes of a current account deflict. Here are a few:
• Netflow of currency from a country on the trade, investment income, and transfer account.
• Economic growth.
• Uncompetitive exports.
• A country relies on foreigners for the capital to invest and spend.
• Borrowing money.
• Higher inflation. If a country's inflation rises faster than its main competitors, it will result in the country's LESS competitive and imports MORE competitive.
• Finally, over valued exchange rate. If the currency of a country is overvalued, its imports will be cheap, so there eill be a higher quantity of imports than exports.
