Why has the goods and services balance sometimes shown a surplus while the merchandise trade balance shows a deficit?

Firstly, it is essential to get familiar with the two terms:1. The Goods and Services Balance refers to the balance of trade in both goods and services, considering both exports and imports. 2. The Merchandise Trade Balance, on the other hand, includes only physical goods and does not consider services. It's essential to understand that the latter does not include services which the former includes.

Now, considering why a surplus in the goods and services balance can occur while a deficit is shown in the merchandise trade balance can be reasoned out. This scenario can occur if the value of exported services and goods combined exceeds the total value of imported goods and services, while at the same time, the value of imported physical goods exceeds the value of exported goods. In simpler terms, a country might be importing more physical items (Merchandise Trade Balance), but it could be exporting high-value services (like digital services, financial advisory, tourism, etc.) that when combined with the goods, brings the total value of exports above imports (Goods and Services Balance), hence showing a surplus.

For instance, let's take a hypothetical country that imports a lot of physical goods, like machinery (a deficit in the Merchandise Trade Balance). But that same country could be a major hub for tourism, or it could provide high-tech digital services to the world, or it could be a financial advisory powerhouse. These service exports, when added to the goods exports, could potentially put the total exports above imports (a surplus in Goods and Services Balance), despite a deficit in merchandise trade balance.