Study the international Finance at the macro level. In this slide we will see the Current Account situation of several countries and Vietnam on focus (as of 2008). In slide 2.2 we will see how to Finance the Current Account deficit.

1. International Finance CFVG-May 2009 The Balance of Payments I Current account

7. The world “missing” exports Underreporting/underinvoicing of export credit items In US$ billion Source: IMF-IFS A « black hole » > US$300 b

8. Who finances whom? Current account balances of OECD (30) and EMCs (160) US$ billion Source: IIF, IMF-WEO 2007

12. US Current account deficit -7% GDP US Treasury, IMF US$ billion

15. The current account of the balance of payments Export of goods f.o.b. - Imports of goods f.o.b. = Trade balance + Exports of non-financial services - Imports of non-financial services + Investment income (credit) - Investment expenditures (debit) + (-) Private unrequited transfers + (-) Official unrequited transfers = Current account balance From less liquid items toward more liquid items!

16. Vietnam’s balance of payments and macroeconomic indicators

17. Economic overheating and surging imports

18. Fast growing GDP= rising trade deficit

19. VIETNAM Trade and Current account balances US$ million Source: IMF /CDD

20. Vietnam’s Balance of payments

25. Vietnam’s exports of goods

26. Vietnam’s imports of goods

28. Service Exports of Vietnam

30. External debt servicing burden Source: IMF-IFS D=50

32. Vietnam’s transfers revenues 1996-2007 US$ million

33. Mexico’s net current transfers inflows In US$ million Source: IMF-IFS/IIF

38. Thailand in the Globalization Large trade openness of Thailand leads to spectacular current account and growth adjustment after 1998 crisis Σ XGS/PIB > 120% GDP Current account

43. Time lags, elasticities and the adjustment mechanism: “J curve” Trade Balance DEFICIT SURPLUS Time path of the current account balance adjustment devaluation

50. Trade openness ratio (X+M/GDP%) France= 43% Brazil= 24% India= 20% USA= 21%

51. MEXICO Current Account Balance ( US$ billion) Source: IMF & IIF )

52. Mexico Current account balance / GDP ratio % Source: IMF & IIF ASIA spill-over

53. CHILE Current account balance / GDP ratio % Source: IMF /CDD

54. BRAZIL Current Account Balance ( US$ billion) Source: IMF & IIF ) Real devaluation

55. RUSSIA Current Account Balance ( US$ billion) Source: IMF & IIF ) Rouble devaluation

56. Thailand’s turnaround after the 1998 crisis Baht devaluation

57. Argentina’s economic recovery after the 2001 financial crisis (% GDP)

59. Growing US Trade Deficit… engine of world growth but global financing pump! High trade deficit = large supply of dollars= downward pressure on $ exchange rate unless higher short-term interest rates by Fed

60. Booming US Current Account Deficit… -7% PBI = K inflows of US$2,2 billion/day

61. US current account and trade balances FRBSF, March 2007

62. Investment > Savings = US BOP Deficit FRBSF March 2007