What is twin deficit

The term “twin deficit” may also be known as “double deficit” and it is related to the general economy. It shows that there is an unexplained or unexplained cause in a state a budget deficit and a current account deficit exist at the same time.

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Budget deficit

The budget deficit of a state is the national debt, which is measured in terms of gross domestic product (GDP). The more often the state tries to borrow, the higher the interest rates, which ultimately increases the state's debt burden even further. A high level of public debt can under certain circumstances lead to a so-called crowding-out effect, which means that investments at the private sector level take a back seat.

Current account deficit

The current account deficit describes in simple terms the following:
The production within the framework of the national economy is less than the consumption of the manufactured goods. Another explanation says that the state purchases more goods from abroad than it exports from its own production abroad. This ultimately reduces the value of the country's own currency, which of course continues to mean that the goods to be imported are more expensive.

A recovery in the current account deficit is initially slightly noticeable when the demand for domestic goods increases abroad, as these are cheaper. Completely compensating for the current account deficit is, however, a long-term affair that should only be possible under certain conditions, but is not entirely impossible.