Since the crisis, there have been major changes in current account imbalances: whereas the global surplus was concentrated in China and oil exporters in the pre-crisis period, capital is today mainly exported from the euro area, Japan and a few other advanced economies. Moreover, although in the aftermath of the financial crisis imbalances shrank rapidly and then remained contained for a few years thereafter, since 2014 they are on the rise once again. - In absolute terms, the euro area is now the world's largest exporter of capital. The euro area plus China and Japan - two countries that have consistently generated current account (CA) surpluses - now represent 75 percent of global net savings. - On the flip side, in the last two years, the US, together with the UK and some other advanced economies (Canada, Australia), have absorbed the vast majority of these savings. Inflows to emerging market economies, which attracted a high share of global surpluses up to 2012-13, have receded without resulting in major turbulence. Finally, since oil prices plummeted, oil-exporting economies have decreased their external supply of capital. - Firstly, this rotation of current account imbalances reflects in part differences in the paths of recovery and the corresponding policy responses in surplus and deficit economies. Between 2015 and November 2017, there were four rate hikes in the US on the back of the US recovery, while the UK saw its first rate hike since 2007. On the other hand, with the economic recovery of the euro area lagging that of the US, monetary policy in the euro area has become more accommodating. In particular, the introduction of the public sector asset purchase programme (PSPP) by the European Central Bank in early 2015 has had an impact on the overall capital flows in and out of the euro area. Monetary policy was also further eased in Japan during the same period. - Secondly, the transition in China from an investment-driven growth model to a consumption-based model also accounts for the change in the global picture. Crucially, China has moved from being a net receiver of foreign direct investment to becoming a net exporter. Moreover, in 2015-16, China made extensive use of its vast foreign-exchange reserves to mitigate strong outflows and prevent depreciation of the yuan (which could have damaging consequences in terms of financial stability in case of currency mismatches in its banking and corporate sectors). This significant reversal in the balance of China's reserves has driven the trend of the overall reduction of the global stocks of foreign exchange reserves. - Thirdly, the current situation also reflects sustained low commodity prices, in particular oil prices. Accentuating the decline in reserves, oil-exporting countries are no longer generating excess savings that are recycled through international investment.
