Euro area balance of payments (geographical breakdown for the fourth quarter of 2007) and international investment position (at the end of the fourth quarter of 2007)
The current account of the euro area balance of payments recorded a surplus of EUR 11.0 billion in the fourth quarter of 2007. The largest surpluses were with the United Kingdom, the United States and countries that joined the European Union (EU) in 2004 and 2007. By contrast, deficits were recorded with the group of “other countries” (i.e. non-G10 countries outside the EU), Japan and the EU institutions.
In the financial account, combined direct and portfolio investment recorded net outflows of EUR 26 billion, as net outflows in portfolio investment exceeded net inflows in direct investment. The latter mainly originated from the United States and the United Kingdom. Portfolio investment by euro area residents predominantly related to net purchases of securities issued in the United States and the group of “other countries”.
At the end of the fourth quarter of 2007, the international investment position of the euro area recorded net liabilities of EUR 1.3 trillion with the rest of the world (15% of euro area GDP). This represented an increase of EUR 41 billion in comparison with the end of the third quarter of 2007.
Geographical breakdown of the euro area balance of payments for the fourth quarter of 2007
Current and capital accounts
The current account of the euro area balance of payments (b.o.p.) recorded a surplus of EUR 11.0 billion in the fourth quarter of 2007 (see Table 1a). This was the result of surpluses in goods (EUR 9.7 billion), services (EUR 10.9 billion) and income (EUR 10.4 billion), which were partly offset by a deficit in current transfers (EUR 20.1 billion). The capital account recorded a surplus of EUR 5.8 billion, predominantly reflecting a surplus vis-à-vis the EU institutions.
The largest surpluses in goods were with the United States (EUR 14.6 billion), the United Kingdom (EUR 14.0 billion) and countries that joined the EU in 2004 and 2007 (EUR 12.1 billion). By contrast, the largest deficits were with mainland China (EUR 28.0 billion), Russia (EUR 6.2 billion) and Japan (EUR 5.7 billion).
The euro area surplus in services was mainly accounted for by surpluses with the United Kingdom (EUR 4.7 billion), Switzerland (EUR 2.5 billion) and China (EUR 1.3 billion). These surpluses were to a limited extent counterbalanced by a deficit with the United States (EUR 3.0 billion).
The euro area surplus in income reflected surpluses with the United States (EUR 5.5 billion), the countries that joined the EU in 2004 and 2007 (EUR 4.4 billion), the United Kingdom (EUR 4.2 billion), and the group of “other countries” (EUR 3.4 billion). These surpluses were partly offset by deficits with Japan (EUR 4.9 billion) and Switzerland (EUR 3.0 billion).
The deficit in current transfers was predominantly with the group of “other countries” (EUR 11.0 billion) and the EU institutions (EUR 8.4 billion).
In 2007 as a whole, the current account of the euro area showed a surplus of EUR 26.4 billion (around 0.3 % of GDP), compared with a deficit of EUR 1.3 billion in 2006 (see Table 1b). This development was predominantly due to a reduction in the goods deficit with the group of “other countries” (from EUR 143.7 billion to EUR 119.3 billion), particularly with Russia, and an increase in the goods surplus with EU countries (from EUR 98.7 billion to EUR 121.4 billion), particularly with the United Kingdom. By contrast, the goods deficit with China increased from EUR 85.3 billion to EUR 104.3 billion, mainly due to an increase in imported goods (from EUR 138.8 billion to EUR 164.4 billion).
Financial account
In the b.o.p. financial account, combined direct and portfolio investment recorded net outflows of EUR 26 billion in the fourth quarter of 2007, as net outflows in portfolio investment exceeded net inflows in direct investment.
Net inflows in direct investment (EUR 18 billion) were largely caused by net inflows from the United States (EUR 35 billion) and the United Kingdom (EUR 13 billion), while net outflows were mainly directed to offshore financial centres (EUR 11 billion) and Russia (EUR 7 billion).
Portfolio investment recorded net outflows of EUR 44 billion Net purchases of foreign securities by euro area investors (EUR 95 billion) predominantly comprised debt securities (EUR 83 billion). The latter were mainly issued in the United States (EUR 42 billion), the United Kingdom (EUR 18 billion) and in the group of “other countries” (EUR 13 billion).
Financial derivatives recorded net outflows of EUR 48 billion.
Other investment recorded net outflows of EUR 5 billion. These were mainly the result of net outflows to Russia (EUR 48 billion), Denmark (EUR 20 billion) and the countries that joined the EU in 2004 and 2007 (EUR 11 billion). These outflows were partly offset by net inflows from Switzerland (EUR 51 billion), the United Kingdom (EUR 36 billion) and Hong Kong (EUR 21 billion).
International investment position at the end of the fourth quarter of 2007
At the end of the fourth quarter of 2007, the international investment position (i.i.p.) of the euro area recorded net liabilities of EUR 1,344 billion with the rest of the world (15% of euro area GDP). This represented an increase of EUR 41 billion in comparison with the revised data for the end of the third quarter of 2007 (see Table 2).
The increase in the net liability position reflected “other changes” (primarily revaluations on account of exchange rate and asset price changes), amounting to EUR 115 billion, mainly related to portfolio investment (EUR 95 billion) and direct investment (EUR 31 billion). The “other changes” were only partly offset by transactions in portfolio investment (EUR 44 billion) and financial derivatives (EUR 48 billion).
Data revisions
This press release incorporates revisions of both the b.o.p. (from the first quarter of 2005 to the fourth quarter of 2007) and the i.i.p. (for the first, second and third quarters of 2007). The revisions of the b.o.p. current account primarily concern income on direct investment. In the b.o.p. financial account and in the i.i.p. revisions largely relate to portfolio investment and other investment.
The inclusion of Cyprus and Malta in euro area external statistics
For the first time, this press release shows the quarterly balance of payments and international investment position for the enlarged euro area, i.e. including Cyprus and Malta. The changes to the euro area external statistics have involved: (i) the inclusion of transactions between residents of Cyprus and Malta and non-euro area residents; and (ii) the exclusion of transactions between euro area residents and residents of Cyprus and Malta. In general, the accession of Cyprus and Malta has had a minor impact on the overall euro area results.
Additional information on the euro area balance of payments and international investment position
A geographical breakdown of the quarterly b.o.p. of the euro area is not available for the items “portfolio investment liabilities”, “financial derivatives” or “reserve assets”. In addition, separate data are not provided for investment income payable to Brazil, mainland China, India and Russia. A geographical breakdown of the i.i.p. is available only on an annual basis.
The ECB and the Statistical Office of the European Communities (Eurostat) each issue a press release on the quarterly b.o.p. for the euro area and the European Union (see Eurostat’s “Euro-Indicators” news releases). In line with the agreed allocation of responsibilities, the ECB compiles and disseminates monthly and quarterly b.o.p. statistics for the euro area, whereas Eurostat focuses on quarterly and annual aggregates for the European Union. These data comply with international standards, particularly those set out in the IMF’s Balance of Payments Manual (fifth edition). The aggregates for the euro area and the European Union are compiled consistently on the basis of Member States’ transactions and positions with residents of countries outside the euro area and the European Union respectively.
A complete set of updated euro area b.o.p. and i.i.p. data is available on the ECB’s website in the “Statistics” section under the headings “Data services”/“Latest monetary, financial markets and balance of payments statistics”. These data, as well as the historical euro area b.o.p. and i.i.p. time series, can be downloaded using the ECB’s Statistical Data Warehouse (SDW). The data will be published in the May 2008 issues of the ECB’s Monthly Bulletin and Statistics Pocket Book. A detailed methodological note is available on the ECB’s website. The next quarterly press release on the euro area b.o.p. (including a geographical breakdown) and i.i.p. will be published on 16 July 2008.
Annexes
Table 1a: Quarterly balance of payments of the euro area with a geographical breakdown (Q4 2007)
Table 1b: Quarterly balance of payments of the euro area with a geographical breakdown (four-quarter cumulated transactions ending in Q4 2006 and in Q4 2007)
Table 2: Quarterly balance of payments and international investment position of the euro area
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