International Payments Imbalances

Abstract

The recent “global payments imbalances” have raised questions about their sustainability and how they can be resolved. Views on these issues are diverse. For developing Asia, the current account surpluses, positive savings-investment gaps, and reserve accumulation pose significant structural challenges: (i) investment rates in several countries are low by historical averages as well as when compared to assessments of needs; (ii) in the PRC, the current account surplus appears to reflect a glut of savings rather than a drought of investment; (iii) reserve accumulation points to the need for deeper and more efficient domestic and regional capital markets; and (iv) governments across Asia need to buttress social protection and insurance mechanisms to cope with possible future economic shocks