In the case that a country experiences current account deficit for a long period of time, the issue of its sustainability and financing arises. If the arbitrary criteria by IMF is taken into consideration a nation's current account deficit is unsustainable if it exceeds the level of 5% of GDP.
However, the experience of some countries (Australia, Malaysia and South Korea) has shown that these countries managed to maintain and finance while running a higher level of nation’s current account deficit (to far over 5%) over a period of several years, in order to then successfully reduce their deficits and even more moved again to current account surplus.
IMHO, the 5% threshold is not a sufficient indicator of the sustainability. According to the development plans, and the potentials shown for implementing them, each case should be assessed separately.
I agree with you. There is a great incentive for each country individually to to make certain adjustments to reduce its current account deficit of BOP taking into account the characteristics of the country when conducting risk assessment at a country or national level , the structural country's trade policy characteristics with the rest of the world, changes in the maturity structure of the current account deficit financing, etc.
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