Balance of Trade

What "Balance of Trade" Means

The balance of trade is a record that shows the total value of goods and services a country imports from other countries compared to the total value of goods and services it exports to them. In simple terms, it tells us whether a country is selling more to the world than it is buying, or the other way around.

Favourable vs. Unfavourable Balance

The direction of this comparison determines whether the balance is considered positive or negative for the country.

• Positive or Favourable Balance of Trade: This occurs when the value of a country's exports is greater than the value of its imports. The country is earning more from selling its goods abroad than it is spending on buying foreign goods.
• Negative or Unfavourable Balance of Trade: This occurs when the value of a country's imports is greater than the value of its exports. The country is spending more on foreign goods than it is earning from its own exports.

Why It Matters for the Economy …