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PRESS RELEASE

Euro area balance of payments (geographical breakdown for the second quarter of 2009) and International investment position (at the end of the second quarter of 2009)

16 October 2009

The current account of the euro area balance of payments recorded a deficit of EUR 25.4 billion in the second quarter of 2009. The largest bilateral deficits were with the group of “other countries” – i.e. countries outside the European Union (EU) other than Canada, Japan, Switzerland and the United States – with the United States and vis-à-vis Japan. By contrast, the largest surpluses were with the United Kingdom and the countries outside the euro area that joined the EU in 2004 and 2007.

In the financial account, combined direct and portfolio investment recorded net inflows of EUR 98 billion as a result of net inflows in portfolio investment. The direct investment account was balanced. Portfolio investment by euro area residents predominantly comprised net purchases of foreign securities issued by the group of “other countries”, by the EU institutions, and in Sweden and Canada.

At the end of the second quarter of 2009, the international investment position of the euro area recorded net liabilities of EUR 2.0 trillion vis-à-vis the rest of the world (22% of euro area GDP). This represented an improvement of EUR 82 billion in comparison with the first quarter of 2009.

Geographical breakdown of the euro area balance of payments for the second 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 25.4 billion in the second quarter of 2009 (see Table 1a). This was the result of deficits in income (EUR 30.3 billion) and current transfers (EUR 15.0 billion), which were partly offset by surpluses in goods (EUR 12.5 billion) and in services (EUR 7.4 billion). The capital account recorded a surplus of EUR 2.4 billion, predominantly reflecting a surplus vis-à-vis EU institutions.

The largest surpluses in goods were with the United Kingdom (EUR 11.8 billion), the United States (EUR 8.1 billion) and the countries outside the euro area that joined the EU in 2004 and 2007 (EUR 4.4 billion). By contrast, the largest deficits were with mainland China (EUR 17.8 billion), Russia (EUR 5.9 billion) and Japan (EUR 3.3 billion).

The surplus in the services account mainly reflected positive balances with the United Kingdom (EUR 3.6 billion) and Switzerland (EUR 3.3 billion). The largest deficits in services were recorded vis-à-vis the United States (EUR 5.5 billion) and the countries outside the euro area that joined the EU in 2004 and 2007 (EUR 1.9 billion).

The euro area income deficit was mostly accounted for by deficits with the United States (EUR 15.4 billion), Japan (EUR 7.6 billion), Switzerland (EUR 4.2 billion) and the United Kingdom (EUR 2.9 billion), which were partly counterbalanced by a surplus with the countries outside the euro area that joined the EU in 2004 and 2007 (EUR 3.7 billion).

The deficit in current transfers was predominantly with the group of “other countries” (EUR 9.5 billion) and with the EU institutions (EUR 6.9 billion).

The four-quarter cumulated current account of the euro area up to the second quarter of 2009 showed a deficit of EUR 118.7 billion (around 1.3% of euro area GDP), compared with a deficit of EUR 33.0 billion (around 0.4% of euro area GDP) a year earlier (see Table 1b). This development was predominantly due to a shift in the goods account from a surplus of EUR 26.6 billion to a deficit of EUR 4.8 billion, an increase in the income deficit from EUR 16.9 billion to EUR 48.2 billion and a decrease in the services surplus from EUR 50.9 billion to EUR 27.5 billion.

The shift in the goods account was mainly accounted for by decreases in the surpluses with the United States (from EUR 56.1 billion to EUR 37.6 billion), the countries outside the euro area that joined the EU in 2004 and 2007 (from EUR 43.4 billion to EUR 28.4 billion) and the United Kingdom (from EUR 63.8 billion to EUR 49.5 billion). The increase in the income deficit reflected mainly an increase in the deficit with the United States (from EUR 10.9 billion to EUR 25.6 billion) and a decrease in the surplus with the group of “other countries” (from EUR 30.1 billion to EUR 6.8 billion).

Financial account

In the financial account, combined direct and portfolio investment recorded net inflows of EUR 98 billion in the second quarter of 2009, as a result of net inflows in portfolio investment.

The direct investment account was balanced. The largest net inflows in direct investment into the euro area were recorded from the United States (EUR 44 billion) and from the countries outside the euro area that joined the EU in 2004 and 2007 (EUR 7 billion), which were offset by net outflows to offshore financial centres (EUR 41 billion), Switzerland (EUR 5 billion) and the group of “other countries” (EUR 5 billion).

Portfolio investment recorded net inflows of EUR 98 billion Net purchases of foreign securities by euro area investors (EUR 41 billion) predominantly comprised securities issued by the group of “other countries” (EUR 24 billion), by the EU Institutions (EUR 13 billion), in Sweden (EUR 12 billion) and in Canada (EUR 7 billion). By contrast, net sales were recorded primarily in securities issued in offshore financial centres (EUR 22 billion). Net purchases of euro area securities by non-residents amounted to EUR 139 billion.

Financial derivatives recorded net inflows of EUR 20 billion.

Other investment recorded net outflows of EUR 107 billion. These were mainly the result of net outflows to the United States (EUR 91 billion), offshore financial centres (EUR 36 billion), Switzerland (EUR 18 billion), mainland China (EUR 13 billion) and Denmark (EUR 12 billion), which were partly offset by net inflows from the United Kingdom (EUR 45 billion) and Sweden (EUR 9 billion).

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

At the end of the second quarter of 2009, the international investment position (i.i.p.) of the euro area recorded net liabilities of EUR 2.0 trillion vis-à-vis the rest of the world (about 22% of euro area GDP). This represented an improvement of EUR 82 billion in comparison with the revised data for the end of the first quarter of 2009 (see Table 2).

The change in the net i.i.p. was mainly the result of a lower net liability position in other investment (from EUR 468 billion to EUR 341 billion) and a higher net asset position in direct investment (from EUR 600 billion to EUR 640 billion), which were partially compensated for by a higher net liability position in portfolio investment (from EUR 2 594 billion to EUR 2 657 billion). While the changes in the net positions in portfolio and other investment were primarily driven by transactions, the changes in the net asset position in direct investment was mainly driven by “other changes” (revaluations on account of exchange rate and asset price changes, as well as the change of residency to the euro area of some multinationals’ headquarters).

Data revisions

This press release incorporates revisions to the b.o.p. (including a geographical breakdown) and to the i.i.p. for the first quarter of 2009. In addition, the preliminary results of the monthly b.o.p. for April, May and June 2009 are also revised in the b.o.p. for the second quarter of 2009.

The revisions in the current account have resulted in a lower deficit in the first quarter of 2009 (from EUR 42.4 billion to EUR 40.7 billion) and a higher deficit in the second quarter of 2009 (from EUR 20.5 billion to EUR 25.4 billion). While revisions in the second quarter of 2009 were concentrated in income, they mainly affected goods, income and current transfers in the first quarter of 2009. In the b.o.p. financial account, revisions in the first quarter of 2009 amounted to EUR 41 billion, mainly due to revisions in combined direct and portfolio investment (EUR 37 billon) and in financial derivatives (EUR 20 billion), whereas revisions in the second quarter of 2009 (EUR 8 billion) mainly concerned other investment (EUR 12 billion).

In the i.i.p. at the end of the first quarter of 2009, revisions mainly resulted in a higher liability position in portfolio investment.

Additional information on the euro area balance of payments and international investment position

The compilation method for three items in the b.o.p. financial account for “ other sectors” (namely sectors other than the Eurosystem, other monetary financial institutions and general government) will be modified as from the press release to be published on 2 November 2009. In particular, the new method involves grossing-up procedures in the compilation of other investment assets in loans and in deposits and portfolio investment equity liabilities. The new results entail a considerable reduction of the statistical discrepancies within the b.o.p. of the euro area from 2004 onwards. More information will be provided with the press release of 2 November 2009.

A geographical breakdown of the quarterly b.o.p. of the euro area is not available for the items “portfolio investment liabilities”, “financial derivatives” and “reserve assets”. Moreover, 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 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 from the ECB’s Statistical Data Warehouse (SDW). The data will be published in the November 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 20 January 2010.

Annexes

Table 1a: Quarterly balance of payments of the euro area with a geographical breakdown (Q2 2009)

Table 1b: Four-quarter cumulated balance of payments of the euro area with a geographical breakdown

Table 2:Quarterly international investment position of the euro area

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