10.2.4—Growth and balance of payments

Growth can affect the balance of payments by raising import demand, changing competitiveness and attracting or generating capital flows. The direction depends on the source and composition of growth.

Demand-led growth often increases imports as incomes rise; productivity-led export growth may improve the current account. An appreciating currency or high import content can offset the benefit.

A construction boom that relies on imported machinery may widen the current-account deficit, while export-sector productivity growth can raise foreign receipts without the same import surge.

A growing economy does not automatically improve its external balance, and a deficit is not necessarily unsustainable if it finances productive investment.