Evaluation of the Factors Determining Risk of Growing Current Account Deficit to the Country in the Context of Economic Growth

Abstract

Global current account deficit as a ratio with GDP in 1980-2010 increased more than 200%. The problem of growing current account deficit is encountered not only by developing countries but also by the developed ones and evaluating the last decade, their average annual amounts reached the level of 20 % from GDP or even more (Island – 15,7 %, Malta – 9,9 %, the USA – 6 %, Lithuania – 11 %, Bulgaria – 25,2 %, Latvia – 22,4 % from GDP). In the countries the growing current account deficit is considered as a sign of economic weakness which indicates certain problems of changes of competitiveness in a country. While solving the problem of extents of growing current account deficit in the countries it is important to evaluate what determines growing current account deficit and its risk to national economic growth.

The evaluation of the factors determining the risk of growing current account deficit to the country was performed in the groups of countries that experience economic slowdown and the ones that do not encounter it. Logistic regression is selected for a more accurate assessment of the growing current account deficit problem.

It was set by the survey that the risk of growing current account deficit to the country depends on the factors which determined it; whereas the reasons of the growing deficit identified in the groups of countries that experience the economic slowdown and the ones which do not encounter it are different. The performed research sets apart the factors of growing current account deficit in the country, which could explain the risk of it in the aspect of economic growth.

DOI: http://dx.doi.org/10.5755/j01.ee.28.1.10961