Menu
PRESS RELEASE

Euro area Balance of Payments (geographical breakdown for the second quarter of 2008) and International Investment Position (at the end of the second quarter of 2008)

17 October 2008

The current account of the euro area balance of payments recorded a deficit of EUR 24.4 billion in the second quarter of 2008 (non-seasonally adjusted data). The main deficits were observed with the group of “other countries” (i.e. non-G10 countries outside the European Union (EU)), Japan and the EU institutions. The largest surpluses were recorded with the countries that joined the EU in 2004 and 2007, and with the United Kingdom.

In the financial account, combined direct and portfolio investment recorded net outflows of EUR 15 billion. The net outflows in direct investment amounted to EUR 49 billion and were mainly directed towards the group of “other countries”, the United States and the United Kingdom. Portfolio investment recorded net inflows of EUR 34 billion, as a result of net purchases of euro area securities by non-residents (EUR 172 billion) and net purchases of foreign securities by euro area investors (EUR 138 billion). The latter securities were predominantly issued in the United Kingdom (EUR 42 billion), the group of “other countries” (EUR 31 billion), Japan (EUR 27 billion) and the United States (EUR 22 billion).

At the end of the second quarter of 2008, the international investment position of the euro area recorded net liabilities of EUR 1.0 trillion with the rest of the world (11% of euro area GDP). This represented a decrease in net liabilities of EUR 57 billion in comparison with the revised figure for the end of the first quarter of 2008.

Geographical breakdown of the euro area balance of payments for the second quarter of 2008

Current and capital accounts

The non-seasonally adjusted current account of the euro area balance of payments (b.o.p.) recorded a deficit of EUR 24.4 billion in the second quarter of 2008 (see Table 1a). This was the result of deficits in income (EUR 29.2) and current transfers (EUR 17.1billion), which were only partly offset by surpluses in services (EUR 15.7 billion) and goods (EUR 6.2 billion). The capital account recorded a surplus of EUR 3.0 billion.

The largest surpluses in goods were with the United Kingdom (EUR 14.9 billion), the countries that joined the EU in 2004 and 2007 (EUR 14.0 billion) and the United States (EUR 12.6 billion). These surpluses were partly counterbalanced by deficits with mainland China (EUR 21.8 billion), Russia (EUR 8.7 billion) and Japan (EUR 5.7 billion).

The surplus in services was mainly accounted for by surpluses vis-à-vis the United Kingdom (EUR 7.4 billion) and the group of “other countries” (EUR 4.7 billion).

The deficit in income reflected deficits with the United States (EUR 16.4 billion), the United Kingdom (EUR 11.8 billion), Switzerland (EUR 7.9 billion) and Japan (EUR 7.1 billion). These were partly offset by surpluses with the group of “other countries” (EUR 10.7 billion) and with the countries that joined the EU in 2004 and 2007 (EUR 5.1 billion).

The deficit in current transfers was predominantly vis-à-vis the EU institutions (EUR 9.8 billion) and the group of “other countries” (EUR 9.6 billion). The surplus in the capital account predominantly reflected a surplus vis-à-vis the EU institutions (EUR 5.3 billion).

The four-quarter cumulated current account of the euro area up to the second quarter of 2008 showed a deficit of EUR 8.2 billion (around 0.1% of GDP), compared with a surplus of EUR 20.4 billion a year earlier (see Table 1b). This development predominantly reflected (i) a decrease in the goods surplus (from EUR 51.4 billion to EUR 31.4 billion), which mainly resulted from a larger deficit with mainland China and a smaller surplus vis-à-vis the United States, (ii) a switch in the income account from surplus (EUR 3.2 billion) to deficit (EUR 4.7 billion), which was mainly driven by a similar shift in this balance with the United Kingdom, and (iii) an increase in the current transfers deficit (from EUR 78.5 billion to EUR 90.1 billion), in particular with the EU institutions. By contrast, the services surplus increased from EUR 44.4 billion to EUR 55.1 billion, mainly as a consequence of larger net exports to the group of “other countries”, in particular mainland China, and to the United Kingdom.

Financial account

In the b.o.p. financial account, combined direct and portfolio investment recorded net outflows of EUR 15 billion in the second quarter of 2008, as net outflows in direct investment exceeded net inflows in portfolio investment.

Net outflows in direct investment (EUR 49 billion) were mainly directed towards the group of “other countries” (EUR 22 billion), the United States (EUR 14 billion) and the United Kingdom (EUR 11 billion).

Portfolio investment recorded net inflows of EUR 34 billion, mainly as a result of net purchases of euro area bonds and notes by non-residents (EUR 172 billion) Net purchases of foreign securities by euro area investors amounted to EUR 138 billion and predominantly comprised debt securities issued in the United Kingdom (EUR 33 billion), the group of “other countries” (EUR 24 billion), Japan (EUR 17 billion) and the United States (EUR 16 billion).

Financial derivatives recorded net outflows of EUR 9 billion.

Other investment recorded net inflows of EUR 111 billion, which were mainly the result of net inflows from the United States (EUR 99 billion) and, to a lesser extent, the United Kingdom (EUR 31 billion). These net inflows were partly offset by net outflows to the group of “other countries” (EUR 25 billion) and to the countries that joined the EU in 2004 and 2007 (EUR 12 billion).

International investment position at the end of the second quarter of 2008

At the end of the second quarter of 2008, the international investment position (i.i.p.) of the euro area recorded net liabilities of EUR 1,048 billion with the rest of the world (around 11% of euro area GDP). This represented a decrease of EUR 57 billion in comparison with the revised data for the end of the first quarter of 2008 (see Table 2). This decrease mainly reflected “other changes” rather than transactions during the second quarter of 2008.

The change in the net i.i.p. was the result of a lower net liability position in portfolio investment (from EUR 1,727 billion to EUR 1,587 billion) and a higher net asset position in direct investment (from EUR 539 billion to EUR 596 billion), which were partially compensated for by a higher net liability position in other investment (from EUR 280 billion to EUR 414 billion). While the changes in the net position in direct and other investment were primarily driven by transactions, the changes in the net liability position in portfolio investment were mainly driven by “other changes” (primarily revaluations on account of exchange rate and asset price changes).

Data revisions

This press release incorporates revisions of the b.o.p. and the i.i.p. for the first quarter of 2008. The revisions of the b.o.p. for the first quarter of 2008 mainly concern the other investment inflows, which have been revised downwards by EUR 16 billion, and the financial derivatives outflows, which have been revised upwards by EUR 6 billion. The current account deficit has been revised downwards by EUR 7 billion.

The net liabilities in the i.i.p. at the end of the first quarter of 2008 have been revised downwards by EUR 175 billion (from EUR 1,279 billion to EUR 1,104 billion). The revisions mostly affect the liability positions in portfolio investment and other investment.

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 EU (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 EU. 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 EU are compiled consistently on the basis of Member States’ transactions and positions with residents of countries outside the euro area and the EU 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 November 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 20 January 2009. In addition, a separate press release on the geographical breakdown of the i.i.p. as at the end of 2007, including annual revisions of the euro area b.o.p. and i.i.p., will be published on 6 November 2007.

Annexes

Table 1a: Quarterly balance of payments of the euro area with a geographical breakdown (Q2 2008)

Table 1b: Quarterly balance of payments of the euro area with a geographical breakdown (four-quarter cumulated transactions ending in Q2 2007 and in Q2 2008)

Table 2:Quarterly balance of payments and international investment position of the euro area

Media contacts