1.2 Balance of payments surplus and deficit
The balance of payments always balances since each credit in the account has a corresponding debit elsewhere.However, this does not mean that each of the individual accounts that make up the balance of payments is necessarily in balance; for instance, the current account can be in surplus while the capital account is in deficit.When talking about a balance of payments deficit or surplus economists are really saying that a subset of items in the balance of payments is in surplus or deficit.
Economists make a distinction between autonomous (above the line)and accommodating (below the line)items.The former are transactions that take place independently of the balance of payments, whilst accommodating items are those transactions which finance any difference between autonomous receipts or payments.A surplus in the balance of payments is defined as an excess of autonomous receipts over autonomous payments, while a deficit is an excess of autonomous payments over autonomous receipts.
Autonomous receipts ＞ autonomous payments = surplus
Autonomous receipts ＜ autonomous payments = deficit
We shall now review some of the most important of these concepts and consider their usefulness as economic indicators.