GPI 2021: Global flows

US to lead global recovery.

GLOBAL INVESTMENT IMBALANCES widened in 2020 and look likely to do so again this year as the US leads the global economic recovery. The cumulative debtor position of countries with net international investment position deficits climbed to 25% from 21% of global gross domestic product. An economy’s NIIP is the difference between its domestic holdings of foreign assets and foreign holdings of liabilities. For example, a non-US sovereign fund, pension fund or central bank acquiring US assets such as equities or Treasuries raises the surplus of their country (or reduces its deficit) and increases the US NIIP deficit.

This was the main story in 2020 as a strong fiscal response in the US led to extra debt issuance and robust growth towards the end of the year, increasing the US current account deficit. When a country runs a current account deficit, it accrues liabilities against the rest of the world, which in this case meant the rest of the world acquired US liabilities, such as Treasuries.

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