Current account imbalances, facts, drivers, and policy challenges

Current account imbalances have re-emerged in global policy debates amid renewed widening, persistence and trade tensions. This paper reviews stylised facts on global imbalances, lessons from past rebalancing episodes, and policy implications. It shows that global imbalances remain persistent and concentrated in a few economies, are shaped more by differences in saving than in investment, and that net international investment positions are strongly influenced by valuation and nominal growth effects. Deficit narrowing is typically accompanied by export growth and higher private saving‑investment balances, especially in firms, while surplus narrowing is more often associated with higher imports and lower net lending across sectors. Larger initial imbalances – especially deficits – are associated with a higher probability of subsequent narrowing. Overall, durable rebalancing is unlikely to be achieved through trade measures or any single policy instrument. Instead, it could benefit from domestically grounded reforms, including fiscal adjustment where needed, and structural measures to reduce excess saving and support investment. Stronger prudential oversight, especially of non-bank financial institutions, would mitigate financial risks. Industrial policy may affect trade balances for individual goods but is unlikely to durably alter aggregate current account positions.