AS Macro Key Term:  Balance of Payments

The Balance of Payments provides data on how an economy is doing in international trade and investment with other countries. There are a variety of different items that together make up the balance of payments. For AS level you need to understand what goes into the current account – namely:

• The trade balance in goods and services (i.e. the value of exports – value of imports)
• Transfer balance – cash transactions which do not form payments for goods or services such as foreign aid or payments to the EU budget
• Investment income balance – measures earnings on foreign investments minus the earnings paid to foreigners on their investments in this country. Income can come in the form of interest, profits and dividends.

What is happening to a country’s current account can tell us a lot about the macroeconomic performance and competitiveness of a nation and in particular whether businesses and industries are competing successfully in the world economy.

Our charts below track what has been happening to the various components of the current account of the UK balance of payments. The data is taken from the OECD World Economic Outlook and thus the data is measured in US dollars ($).

Balance of Trade in Goods and Services

Data from Timetric.

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United Kingdom Trade Balances for Goods and Services from Timetric

Net Transfers

Data from Timetric.

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United Kingdom Net Total Transfers from Timetric

Net Investment Income

Data from Timetric.

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United Kingdom from Timetric

Overall Current Account Balance

Data from Timetric.

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United Kingdom Current Account Balances from Timetric