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PRESS RELEASE

euro area balance of payments (geographical breakdown for the first quarter of 2009) and international investment position (at the end of the first quarter of 2009)

16 July 2009

The current account of the euro area balance of payments recorded a deficit of EUR 42.4 billion in the first quarter of 2009. The largest bilateral deficits were with the group of “other countries” ( i.e. countries outside the European Union other than Canada, Japan, Switzerland and the United States), the European Union institutions, Japan and the United States. By contrast, the largest surpluses were with the United Kingdom and the countries that joined the European Union (EU) in 2004 and 2007.

In the financial account, combined direct and portfolio investment recorded net inflows of EUR 141 billion, as net inflows in portfolio investment exceeded net outflows in direct investment. The developments in direct investment mainly originated from net outflows to the United States, the United Kingdom and the group of “other countries”. Portfolio investment by euro area residents predominantly comprised net sales of foreign securities issued primarily in offshore financial centres, the United Kingdom and Japan.

At the end of the first quarter of 2009 the international investment position of the euro area recorded net liabilities of EUR 2.0 trillion with the rest of the world (22% of euro area GDP). This represented an increase of EUR 0.2 trillion in comparison with the fourth quarter of 2008.

Geographical breakdown of the euro area balance of payments for the first quarter of 2009

Current and capital accounts

The current account of the euro area balance of payments (b.o.p.) recorded a deficit of EUR 42.4 billion in the first quarter of 2009 (see Table 1a). This was the result of deficits in current transfers (EUR 30.2 billion), goods (EUR 10.3 billion) and income (EUR 2.6 billion); the services account was close to balance. The capital account recorded a surplus of EUR 1.5 billion, predominantly reflecting a surplus vis-à-vis the EU institutions.

The largest deficits in goods were with mainland China (EUR 25.7 billion), Russia (EUR 4.9 billion) and Japan (EUR 4.5 billion). By contrast, the largest surpluses were with the United Kingdom (EUR 12.0 billion), the countries that joined the EU in 2004 and 2007 (EUR 4.6 billion), the United States (EUR 3.9 billion) and Switzerland (EUR 2.6 billion).

The broadly balanced services account reflected minor surpluses with the majority of counterparts, which were offset by a deficit with the United States (EUR 6.5 billion).

The euro area income deficit was accounted for by deficits with Japan (EUR 5.6 billion), Switzerland (EUR 2.8 billion) and the United States (EUR 2.3 billion), which were partly offset by surpluses with the countries that joined the EU in 2004 and 2007 (EUR 4.5 billion), the group of “other countries” (EUR 2.9 billion) and the United Kingdom (EUR 1.9 billion).

The deficit in current transfers was predominantly with the EU institutions (EUR 15.7 billion) and the group of “other countries” (EUR 13.6 billion).

The four-quarter cumulated current account of the euro area up to the first quarter of 2009 showed a deficit of EUR 126.1 billion (around 1% of euro area GDP), compared with a deficit of EUR 8.7 billion a year earlier (see Table 1b). This development was predominantly due to a shift in the goods account from a surplus of EUR 37.8 billion to a deficit of EUR 13.8 billion, an increase in the income deficit from EUR 6.1 billion to EUR 47.4 billion, and a decrease in the services account surplus from EUR 51.8 billion to EUR 33.5 billion. The shift in the goods account was mainly accounted for by decreases in the surpluses with the United States (from EUR 58.5 billion to EUR 41.3 billion) and with the United Kingdom (from EUR 63.8 billion to EUR 53.4 billion), and an increase in the deficit with the group of “other countries” (from EUR 131.9 billion to EUR 147.8 billion).

Financial account

In the b.o.p. financial account, combined direct and portfolio investment recorded net inflows of EUR 141 billion in the first quarter of 2009, as net inflows in portfolio investment exceeded net outflows in direct investment.

Net outflows in direct investment (EUR 39 billion) were largely accounted for by net outflows to the United States (EUR 23 billion), the United Kingdom (EUR 17 billion) and the group of “other countries” (EUR 6 billion); net inflows were mainly recorded from offshore financial centres (EUR 8 billion) and Canada (EUR 5 billion).

Portfolio investment recorded net inflows of EUR 179 billion Net sales of foreign securities by euro area investors (EUR 72 billion) predominantly comprised securities issued in offshore financial centres (EUR 38 billion), the United Kingdom (EUR 23 billion) and Japan (EUR 19 billion). By contrast, net purchases were recorded primarily in securities issued by EU institutions, namely by the European Investment Bank (EUR 6 billion), and the group of “other countries” (EUR 6 billion).

Financial derivatives recorded net inflows of EUR 14 billion.

Other investment recorded net outflows of EUR 13 billion. These were mainly the result of net outflows to the United States (EUR 76 billion) and Japan (EUR 21 billion), which were partly offset by net inflows from the group of “other countries” (EUR 41 billion), EU institutions (EUR 12 billion), offshore financial centres (EUR 9 billion) and Switzerland (EUR 9 billion).

International investment position at the end of the first quarter of 2009

At the end of the first quarter of 2009 the international investment position (i.i.p.) of the euro area recorded net liabilities of EUR 2.0 trillion with the rest of the world (about 22% of euro area GDP). This represented an increase of EUR 0.2 trillion in comparison with the revised data for the end of the fourth quarter of 2008 (see Table 2).

The increase in the net liability position mainly reflected net b.o.p. transactions amounting to EUR 148 billion, for the most part related to portfolio investment (EUR 179 billion). In addition to b.o.p. transactions, “other changes” (primarily revaluations on account of exchange rate and asset price changes) contributed EUR 34 billion to the increase in the net liability position.

Data revisions

This press release incorporates revisions of the b.o.p. (with a geographical breakdown) and the i.i.p. for the fourth quarter of 2008 and of the preliminary results from the sum of the monthly b.o.p. for January, February and March 2009.

The revisions have resulted in higher deficits in the b.o.p. current account (from EUR 22.0 billion to EUR 29.5 billion in the fourth quarter of 2008 and from EUR 25.9 billion to EUR 42.4 billion in the first quarter of 2009). While for the fourth quarter of 2008 revisions primarily affected income, for the first quarter of 2009 they were evenly distributed across goods, services, income and current transfers. In the b.o.p. financial account, revisions mainly resulted in higher portfolio investment inflows in the first quarter of 2009.

In the i.i.p. at the end of the fourth quarter of 2008, revisions mainly resulted in a decrease in the asset position in direct investment and an increase in the liability position in portfolio 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; furthermore, for offshore financial centres and international organisations, data are only available for the financial account. A geographical breakdown of the i.i.p. is only available on an annual basis.

The European Central Bank (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 from the ECB’s Statistical Data Warehouse (SDW). The data will be published in the August 2009 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 October 2009.

Annexes

Table 1a: Quarterly balance of payments of the euro area with a geographical breakdown (Q1 2009)

Table 1b: Quarterly balance of payments of the euro area with a geographical breakdown (four-quarter cumulated transactions ending in Q1 2008 and in Q1 2009)

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

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