Patterns and trends in global saving and investment ratios

There have been substantial changes in the size and distribution of current account balances around the world in recent decades. This article focuses on the differences in the saving and investment ratios of the major countries and emerging regions that have underpinned these changes. It shows that saving and investment ratios as a share of GDP have, for many decades, been much higher in Asia than in all other regions of the world, with persistent current account surpluses in Asia offsetting deficits in other areas. The article also shows that, in contrast to the early 2000s when the US current account deficit widened as the saving ratio fell, since the mid 2000s the investment and saving ratios in the United States have broadly moved commensurately, and hence the US current account deficit has been fairly stable as a share of GDP. The large increases in the current account surpluses of China and the oil exporters between 2005 and 2008 – as their saving ratios increased more than their investment ratios – have instead been associated with larger current account deficits in major countries and regions outside of the United States. The article concludes with a review of the near-term trends in these aggregates in light of the global recession.