What exactly is Current Account Balance?

There is a ranking for current account balance and I kinda looked it up and it's hard for me to understand. The ranking is here:


https://www.cia.gov/library/publications/the-world-factbook/rankorder/2187rank.html


and is it lower the number the better or higher the number the better? Why is USA so down there and countries like Japan, China, Germany are so high?|||The current account is calculated by adding these three things:





Net Exports (Exports - Imports)


Net Factor Income (Interest %26amp; dividends)


Net Transfers (Foreign Aid)





The biggest component of the current account is the net exports part. Basically this is why you see USA having such a low current account and Japan, China and Germany (huge exporting countries) have a high current account balance.





Having a high or low number is not always good or bad, depending on the circumstance. The balance should not stay super negative for a long time though. However, a negative current account can signal good things. If a country has a high savings rate, and is importing a lot of capital goods from around the world, it usually signals high future growth. For instance, in the states in the 1800s, there was a high savings rate, and a hugely negative capital account. The negative capital account was used to finance the importation of goods used to create the railroads that really linked the country together, and fed a lot of future growth.





So if you want to find out what if the current account balance is a good thing or a bad thing, look at the private savings rate for the country. If it is a high proportion of income, then you're looking at a pretty good thing. Otherwise, the negative current account balance is being used to finance consumption, and that is a bad thing.





You can also look into the financial account, it's the opposite of the current account and probably something interesting for you to analyze.





Finally, the CIA is a notoriously inaccurate source. They've probably got the answer in the ballpark, but any country's central bank will have more accurate information. The IMF is also a great source for balance of payment information.