Global imbalances appear to have stabilized at new lower levels
The steady decline in global trade imbalances that has characterized the past 5 years, appears to be slowing, with the aggregate absolute value of current account balances having declined from a high of 5.7 percent to about 4 percent of global GDP in 2011 (figure 10).
Figure 10. Global imbalances have narrowed and are expected to remain much lower than in the mid-2000s
Source: World Bank
Much of the decline to date reflects a fall in the U.S. trade deficit and in China’s trade surplus following the financial crisis. In the United States, while cyclical factors are still at play, longer-term factors have been important as well. In particular, the bursting of the housing bubble saw spending levels fall back in-line with production and the U.S. personal savings rate move from negative territory to 4.6 percent in 2011. As a result, import growth slowed, and the U.S. current account deficit declined from 6 percent of GDP in 2006 to 3.1 percent of GDP in 2011.
At the same time, China’s surplus narrowed from more than 10 percent of GDP in 2007 to 2.8 percent in 2011, as the country regained and even surpassed full-employment levels of output. The decline in China’s surplus partly reflects reduced high-income import demand, but also a post-crisis growth strategy in China that has emphasized domestic sources of growth, notably investment, which has raised imports faster than exports.
Looking forward, global imbalances are expected to remain broadly constant. Declining surpluses among oil exporters, where windfall oil revenues are projected to continue fueling import demand growth in excess of export growth for several years (a modest projected decline in global oil prices will also play a role) are projected to be offset by an increase in deficits among high-income countries. As domestic demand recovers, their current account deficits are expected to expand through 2014 (to 3.6 percent in the case of the United States). China’s surplus is projected to rise to about 3.6 percent of its GDP as efforts to reduce its current reliance on investment spending reorient demand toward less import-intensive consumer goods.