Oil exporters returned to currency manipulation in 2021

June 8, 2022 9:00 AM
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Currency manipulation—official purchases of excessive amounts of foreign currencies to support large trade surpluses—increased modestly in 2021 as several oil exporters returned to manipulation with the sharp rise in oil prices. These exporters included Kuwait, Norway, and the United Arab Emirates.[1] Some other manipulators scaled their purchases back from elevated 2020 levels, including Singapore, Switzerland, and Taiwan.

The large increase in trade (current account) balances of oil exporters was matched by declines in the current account balances of the United States and some developing-economy oil importers such as India, the Philippines, and Thailand.[2] Current account balances of other large oil importers, such as China, Germany, and Japan, were little changed. The decline in the US trade balance reflects an aggressive fiscal response to the COVID-19 pandemic, which boosted US spending more than spending elsewhere. It may also reflect a tendency for currency manipulators to purchase relatively more US assets than assets in other countries, which contributes to a strong US dollar and more US imports.

Countries manipulate the value of their currency by selling it to buy foreign currency in order to make their exports cheaper and imports more expensive. In 2021, eight countries met the criteria for manipulation put forth in 2017 by C. Fred Bergsten and Joseph E. Gagnon: Brunei Darussalam, Israel, Kuwait, Norway, Singapore, Switzerland, Taiwan, and the United Arab Emirates. Together, these countries purchased $405 billion in net official assets, slightly more than the purchases of $349 billion by eight countries that exceeded the criteria in 2020,[3] but less than during the peak years of manipulation in 2003–13, when purchases by manipulators sometimes exceeded $1 trillion per year.

What Defines a Currency Manipulator?

According to Bergsten and Gagnon, a country must meet all of the following criteria to be considered a currency manipulator in a given calendar year:

  • The current account surplus exceeds 3 percent of GDP;
  • Net acquisitions of official foreign-currency assets (net official flows) exceed 2 percent of GDP;
  • Foreign exchange reserves and other net official assets exceed three months of imports of goods and services;
  • Foreign exchange reserves and other net official assets exceed 100 percent of short-term external debt, public and private;
  • Net official flows exceed 65 percent of energy exports minus production cost; and
  • The country is classified as a high-income or upper-middle-income country by the World Bank.

Currency Manipulation in Recent Years

This blog post applies the Bergsten-Gagnon criteria to all countries with 2021 GDP of at least $1 billion in the International Monetary Fund's World Economic Outlook database (April 2022). The table below shows data for 13 countries that exceeded all criteria in at least one of the past three years, 2019–21.

The first column displays the number of years (out of three) that each country exceeded the criteria. The next two columns display each country's net official assets (foreign exchange reserves plus other official assets minus official liabilities) in billions of dollars and as a percent of GDP in 2021.[4] The next four columns display net official flows (or net acquisitions) in each of the past three years in billions of dollars as well as in 2021 in percent of GDP. The last two columns display net official flows and the current account balance as a percent of GDP, averaged over the past three years.

Countries are grouped according to their international economic characteristics. Four are financial centers; four are manufacturing exporters; and five are resource exporters. Within each grouping, countries are ranked by 2021 net official assets in US dollars.

There were large increases in net official flows in some resource exporters, notably Norway, the United Arab Emirates, and Kuwait, which had been identified as manipulators by Bergsten and Gagnon for several years each during the period 2000–15. One motivation for this manipulation is to avoid the currency appreciation that typically occurs in oil exporters when oil prices rise. This appreciation is part of the normal adjustment process that balances increased export revenues with increased imports. Manipulation short-circuits this adjustment and protects domestic producers who compete with imports. Another motivation is to save resource revenues for future generations. Many resource exporters do not save much, but a few save excessively. This case study of Norway provides a further discussion.

Brunei Darussalam appears for the first time in our listings owing to newly available data for 2020 and 2021. Missing data on official flows and stocks of assets prevent us from designating Brunei as a manipulator prior to 2020, but it was likely a manipulator in some years between 2000 and 2019 given its large current account surpluses in those years and the accumulated stock of official foreign assets in 2021. Iceland exceeded the criteria only in 2019 and not in any other year since 2000.[5]

The financial centers listed in the table include the largest and most regular manipulators in recent years. Their manipulation typically responds to capital inflows in turbulent times as they seek to prevent appreciation of their currencies, which would reduce their trade surpluses. The COVID-19 pandemic induced a surge of private inflows to Singapore, Switzerland, and Hong Kong in 2020, which abated in 2021 along with a corresponding reduction in their official outflows.

Among manufacturing exporters, Korea and Taiwan have been frequent manipulators but their foreign-currency purchases in 2021 were close to the criterion of 2 percent of GDP.[6] Israel stepped up its official purchases in 2020 and maintained them in 2021. Thailand switched to net official sales in 2021. Bergsten and Gagnon identified both countries as occasional manipulators in 2000–15.

Currency manipulators in 2019–21
  Years of manipulation in 2019–21 2021 net official assets Net official flows 2019–21 average net official flows (percent of GDP) 2019–21 average current account balance (percent of GDP)
Billions of US dollars Percent of GDP
Billions of US dollars Percent of GDP 2019 2020 2021 2021
Financial centers
Singapore* 3 1,555 392 110 139 96 24 31 16
Switzerland* 2 1,049 129 16 122 48 6 8 6
Hong Kong 1 497 135 6 34 -1 0 4 8
Macao 2 107 358 5 2 0 1 6 21
Manufacturing exporters
Korea 1 840 47 19 45 32 2 2 4
Taiwan* 3 693 88 16 56 17 2 4 13
Thailand 2 225 44 17 13 -13 -2 1 3
Israel* 2 213 44 6 38 40 8 6 4
Resource exporters
Norway* 1 1,484 308 24 1 41 8 5 6
United Arab Emirates* 1 1,375 335 14 -1 100 24 9 9
Kuwait* 2 768 567 28 21 61 45 29 11
Brunei Darussalam* 1 76 383 n.a. 1 2 10 n.a. 6
Iceland 1 7 27 1 0 1 4 2 1
n.a. = not available
* Met Bergsten-Gagnon criteria for currency manipulation in 2021.

Note: This table lists countries that exceeded all criteria for currency manipulation in at least one year from 2019 through 2021. Differences in data for 2019 and 2020 compared with the April 16, 2021 post reflect revised data. Missing 2021 net energy exports for Brunei Darussalam and Norway are obtained from national sources and for Kuwait and the United Arab Emirates are assumed to have changed in proportion to changes in oil prices and crude oil and natural gas export volumes from 2020 to 2021. Nonreserve official assets and flows as well as reserve flows are constructed for some countries and years using the perpetual inventory method as described in Gagnon and Sarsenbayev (2021).  Imports of goods and services in 2021 are not yet available for Brunei Darussalam, Kuwait, Macao, and United Arab Emirates; in these cases the criterion is based on 2020 imports as a percent of GDP.

Sources: International Monetary Fund, World Bank, Sovereign Wealth Fund Institute, Brunei Darussalam Central Bank and Ministry of Finance and Economy, Central Bank of the Republic of China, Singapore Department of Statistics, Statistics Norway, and authors' calculations. Sources accessed via Macrobond: Bank of Norway (Norges Bank), Central Bank of the United Arab Emirates, and Taiwan Directorate-General of Budget, Accounting and Statistics. Data on nonreserve foreign official assets of Taiwan are obtained from annual reports and detailed balance sheets of the Central Bank of the Republic of China. Oil production cost data are obtained from the Wall Street Journal, "Barrel Breakdown," April 15, 2016, and are extrapolated in proportion to US consumer prices.


1. Resource exporters should save a hefty portion of their profits, including in foreign assets. We identify as manipulators only those countries that save nearly all of their oil export revenues in foreign assets.

2. Current account data are from the International Monetary Fund's World Economic Outlook database (April 2022).

3. Manipulators in 2020 were Hong Kong, Israel, Korea, Kuwait, Macao, Singapore, Taiwan, and Thailand. This list differs from that in our April 2021 blog post owing to data revisions, particularly a downward revision to the Swiss current account, which fell below the 3 percent of GDP requirement.

4. For advanced economies, official liabilities are assumed to be entirely in domestic currency and are not included in this measure.

5. Iceland made large official purchases of foreign currency in 2015–16 as part of the settlement of foreign claims against its banks dating from the Global Financial Crisis of 2008. We choose not to classify these purchases as currency manipulation.

6. Our measure includes both outright purchases and earnings on existing assets. The US Treasury applies the same 2 percent of GDP criterion, but only on outright purchases, which suggests that Taiwan may have been below Treasury's criterion in 2021.