Occasionally, a government official will argue that a country should strive for both a trade surplus and a healthy inflow of capital from abroad. Is this possible?

Capital inflows refer to the net amount of money that flows into a country from other countries, either as foreign direct investment, portfolio investments, or loans. It represents the financing which is available to a country to invest in domestic assets such as infrastructure, real estate, and other productive activities. A healthy inflow of capital from abroad provides resources for economic growth and development. #Step 3: Relationship between trade surplus and capital inflows#

Given the inverse relationship between the current and capital accounts, it becomes difficult for a country to have both a trade surplus and a healthy inflow of capital from abroad simultaneously. If a country has a trade surplus, it is essentially lending its excess savings to the rest of the world, which implies a capital outflow, not an inflow. However, in some specific situations, like an economy that is experiencing rapid growth, increased investment, and a significantly higher overall demand for its goods and services, it might be possible for a country to temporarily achieve both a trade surplus and a healthy inflow of capital. But sustaining this situation in the long run would be challenging due to the relationship between the current and capital accounts.