The meaning of deficit is the situation that occurs when there is a shortage of something necessary. In the economic sphere, it is understood as a deficit when expenses exceed income, with the corresponding shortage of money.
The concept of deficit is mainly linked to the commercial world of states and companies, but there are many kinds of deficits.
The deficit occurs when the balance of a person or entity has a negative balance. In that case, the income there is not enough to support the expenses, that is, the capacity to collect income is less than the burdens it has.
It is associated with the financial and economic situation of an administration ororganization during a specific period of time, which is usually a year, a quarter or a month.
In general, the term deficit is used quite frequently to refer to the accounts of an administration or State. This deficit scenario is negative as the expenses generated by the public body cannot be covered. In the event that a Government does not have sufficient capacity to reduce its debt since it does not have enough reserves to meet the payments or does not lend it more money, it only has the possibility of correcting the deficit through debt with the central bank of the country.
Types of deficit
The deficit is linked to the commercial sphere of administrations and companies, but the main types of deficit include the following:
- Fiscal deficit, with the vinculado public administration. It occurs when a government does not have the sufficient capacity to raise money to cover expenses.
- Budget deficit: refers to the surplus taken into account when making the annual budgets.
- Public deficit: it is the one produced by all the administrations of a country.
- Primary deficit: it is the deficit but without taking into account the financing costs of the administration.
- Foreign deficit: refers to the difference between income and expenses that a state presents with respect to the exterior.
- Capital deficit: when there are more investments abroad with money from the country, than foreign investment in the national territory.
- commercial fail: when the cost of imports is higher than that of exports.
- Financial deficit: when people within a country send more money outside than they receive here.
- Structural deficit: it is independent of the economic period and should be tried to correct.
- Discretionary deficit: it is conditioned by the policies carried out by the Government.
- Tendency deficit: is caused by normal structures such as population growth or birth rate.
- Short-term or cyclical deficit: a temporary situation caused by economic periods.
- Private deficit: it is when a family or company does not have the capacity to get enough income to meet its financial expenses.
The deficit is the opposite term to superavit, so it is possible that you see it associated on many occasions.