Causes of Deficit In Balance of Payments

Economic Factors
Developing countries depend more on imports. They have to import more of machinery and technology. This brings deficit in balance of payments.
High inflation in domestic country makes domestically produced goods expensive relative to foreign goods. This leads to fall in net exports.
There may be a fall in demand for domestic country’s goods. This will also hamper the balance of trade.
Fluctuations in business cycle may adversely affect the domestic demand.

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