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The lingering pandemic and Russia’s invasion of Ukraine are dealing a setback to the global economy, according to the latest External Sector Report of the IMF. The disruptive events are affecting trade, commodity prices, and financial flows, thereby changing current account deficits and surpluses globally.

After years of narrowing, balances widened to 3 percent of global gross domestic product (GDP) in 2020, grew further to 3.5 percent last year, and are expected to expand again this year.
 
The report estimates that this shift increased the United States deficit by 0.4 percent of GDP and contributed to an increase of 0.3 percent of GDP in China’s surplus.
 
Surplus economies like China saw also increases due to greater shipments of medical goods that often flowed to the United States and other deficit economies. Surging transportation costs also contributed to widening global balances in 2021.

Commodity prices are one of the biggest drivers of external positions, and last year’s rally in oil prices from pandemic lows affected exporters and importers asymmetrically. Russia’s February invasion of Ukraine exacerbated the surge in energy, food, and other commodity prices, widening global current account balances by raising surpluses for commodity exporters.

Also, monetary policy tightening is driving currency movements as rising inflation is leading many central banks to accelerate the withdrawal of monetary stimulus. This has caused cumulative outflows from emerging markets, estimated at about $50 billion.