protracted pandemic and Russian invasion of Ukraine cause regression to global economy. This affects trade, commodity prices, and financial flows, which change current account deficits and surpluses. According to the latest report, the global current account balance increased for the second year in a row. IMF report. After several years of contraction, balance sheets have collectively grown to 3% of global GDP in 2020, to 3.5% in 2021, and are expected to increase further in 2022. for example, whether they export or import tourism and medical products. The pandemic and related restrictions have also shifted consumption from services to goods as people travel and enjoy less. It also widened global balance sheets as deficit advanced economies increased imports of goods from surplus emerging markets. We estimate that in 2021 this shift increased the US deficit by 0.4% of GDP and contributed to China’s surplus by 0.3% of GDP. Surplus countries such as China also saw their balance sheets increase due to increased supplies of medical supplies, which were often sent to the US and other deficit countries. Higher transportation costs also helped boost global balance sheets in 2021. And Russia’s invasion of Ukraine in February exacerbated the rise in prices for energy, food and other commodities, expanding global current account balances and widening surpluses for commodity exporters.

In our estimates for 2023 and beyond, we see a steady decline in global current account balances as the impact of the coronavirus pandemic and the war in Ukraine eases, although this expectation remains uncertain. The global current account balance could widen further if fiscal consolidation in deficit countries takes longer than expected. In addition, a stronger dollar could widen the US current account deficit and widen the global current account balance.

* Senior Economist, Deputy Director of the Research Department and Deputy Director of the IMF’s Strategy, Policy and Analysis Department. The article was published on the IMF blog.