Euro area balance of payments (geographical breakdown for the second quarter of 2006) and international investment position (at the end of the second quarter of 2006)
The current account of the euro area balance of payments (b.o.p.) recorded a deficit of EUR 7.6 billion in the second quarter of 2006, which resulted from deficits in current transfers and income that were partly offset by surpluses in goods and services. The deficit in the overall current account was mainly accounted for by deficits with “other countries” (i.e. all countries except Switzerland that do not belong to either the European Union (EU) or the G7), with the EU institutions and with Japan; these deficits were partly counterbalanced by surpluses with the United Kingdom, with the countries that joined the EU in 2004 and with the United States. In the financial account, net outflows in direct investment were predominantly directed towards the United Kingdom. The asset side of the portfolio investment account recorded net purchases by euro area residents of debt securities issued mainly in the United Kingdom and the United States and net sales by euro area residents of equity issued in the United Kingdom.
At the end of the second quarter of 2006, the international investment position (i.i.p.) of the euro area showed net liabilities of EUR 955 billion vis-à-vis the rest of the world (around 12% of euro area GDP), which is about EUR 5 billion less than at the end of the first quarter of 2006.
Geographical breakdown of the euro area balance of payments for the second quarter of 2006
Current and capital accounts
The current account of the euro area b.o.p. recorded a deficit of EUR 7.6 billion in the second quarter of 2006 (see Table 1a). This was the result of deficits in current transfers (EUR 15.8 billion) and income (EUR 10.3 billion) that were partly offset by surpluses in goods (EUR 6.3 billion) and services (EUR 12.1 billion). The capital account recorded a surplus of EUR 1.0 billion, mainly reflecting a surplus with EU institutions.
The largest surpluses in goods were with the United States (EUR 16.8 billion), the United Kingdom (EUR 11.2 billion) and the countries that joined the EU in 2004 (EUR 9.9 billion). Deficits in goods were recorded vis-à-vis Japan (EUR 5.1 billion) and the group of “other countries” i.e. all countries except Switzerland that do not belong to either the European Union or the G7 (EUR 32.4 billion).
The euro area services surplus was mainly accounted for by surpluses with the United Kingdom (EUR 4.5 billion) and Switzerland (EUR 3.9 billion).
The euro area income deficit reflected deficits with the United States (EUR 7.6 billion), Japan (EUR 4.1 billion), the United Kingdom (EUR 3.6 billion) and Switzerland (EUR 3.0 billion), which were partly counterbalanced by surpluses with the countries that joined the EU in 2004 (EUR 4.2 billion) and the group of “other countries” (EUR 4.7 billion).
The deficit in current transfers was predominantly with the EU institutions (EUR 9.4 billion) and with the group of “other countries” (EUR 8.4 billion).
The four-quarter cumulated current account of the euro area up to the second quarter of 2006 showed a deficit of EUR 34.5 billion (around 0.4% of GDP), compared with a surplus of EUR 24.2 billion a year earlier (see Table 1b). This shift was mainly due to a decline in the goods surplus (from EUR 78.9 billion to EUR 24.4 billion), which was largely caused by an increase in the deficit with the group of “other countries” (from EUR 83.2 billion to EUR 147.2 billion). In the year up to the end of the second quarter of 2006, this group of countries accounted for 50% of the euro area’s total imports of goods (up from 47% a year earlier).
Financial account
In the b.o.p. financial account, combined direct and portfolio investment recorded net inflows of EUR 87 billion in the second quarter of 2006, reflecting net outflows in direct investment (EUR 12 billion) and net inflows in portfolio investment (EUR 99 billion).
Direct investment recorded net outflows to the United Kingdom (EUR 31 billion), the countries that joined the EU in 2004 (EUR 10 billion), the United States (EUR 8 billion) and the group of “other countries” (EUR 15 billion), which were only partly offset by net inflows from offshore financial centres (EUR 26 billion), Switzerland (EUR 12 billion) and Japan (EUR 9 billion). A significant part of the flows in direct investment vis-à-vis the United Kingdom and offshore financial centres was due to large transfers of shares within a multinational group; these transactions did not affect the net flows for the euro area as a whole as the outflows in direct investment to the United Kingdom were entirely compensated for by the inflows in direct investment from the United Kingdom and offshore financial centres.
In portfolio investment, net purchases of foreign securities by euro area residents (EUR 41 billion) resulted mainly from net purchases of debt instruments issued in the United Kingdom (EUR 23 billion), the United States (EUR 18 billion), Japan (EUR 12 billion) and offshore financial centres (EUR 10 billion), which were partly offset by net sales of equity issued in the United Kingdom (EUR 17 billion).
Other investment recorded net outflows of EUR 33 billion. These resulted mainly from net outflows to offshore financial centres (EUR 23 billion, predominantly by monetary financial institutions) and the group of “other countries” (EUR 14 billion), and were partly counterbalanced by net inflows from the United States (EUR 23 billion).
International investment position at the end of the second quarter of 2006
At the end of the second quarter of 2006, the i.i.p. of the euro area recorded net liabilities of EUR 955 billion vis-à-vis the rest of the world (representing around 12% of euro area GDP). This was EUR 5 billion less than at the end of the first quarter of 2006 (see Table 2).
The change in the net i.i.p. largely resulted from a decrease in the net liability position in other investment (from EUR 391 billion to EUR 337 billion) and an increase in the net asset position in direct investment (from EUR 328 billion to EUR 341 billion), which were almost offset by an increase in the net liability position in portfolio investment (from EUR 1,218 billion to EUR 1,280 billion). The changes in the net i.i.p. were mainly accounted for by “other changes” (primarily revaluations due to exchange rate and asset price changes, or reclassifications).
Data revisions
This press release also incorporates revisions of the b.o.p. (with a geographical breakdown) and the i.i.p. for the first quarter of 2006. The revisions of the b.o.p. primarily affected direct investment. The revisions of the i.i.p. mainly reduced the net liability position in portfolio investment (revised from EUR 1,425 billion to EUR 1,218 billion).
Additional information on the euro area balance of payments and international investment position
Geographical details for the quarterly b.o.p. of the euro area are not available for the following items: portfolio investment liabilities, financial derivatives or reserve assets. Geographical details of the i.i.p. are only available at an annual frequency.
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 outside the EU, respectively.
A complete set of updated euro area b.o.p. and i.i.p. statistics is available on the ECB’s website in the “Statistics” section under the heading “Data services”/“Latest monetary, financial markets and balance of payments statistics”. These data can also be downloaded using the ECB’s Statistical Data Warehouse (SDW). The results will be published in the November 2006 issue of the ECB’s Monthly Bulletin. A detailed methodological note is available on the ECB’s website. The next quarterly press release on the euro area b.o.p. (including geographical details) and i.i.p. will be published on 18 January 2007. In addition, a separate press release on the geographical breakdown of the i.i.p. as at the end of 2005, including annual revisions on the euro area b.o.p. and i.i.p., will be published on 14 November 2006.
Annexes
Table 1a: Quarterly balance of payments of the euro area with a geographical breakdown (Q2 2006)
Table 1b: Quarterly balance of payments of the euro area with a geographical breakdown (four-quarter cumulated transactions ending in Q2 2006 and in Q2 2005)
Table 2: Quarterly balance of payments and international investment position of the euro area
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