Balance of payment statistics
From Statistics Explained
- Data from April 2014. Most recent data: Further Eurostat information, Main tables and Database. Planned article update: April 2015.
The balance of payments records all economic transactions between resident and non-resident entities during a given period. This article presents data on the current and financial accounts of the balance of payments for the European Union (EU) and its Member States.
The current account balance determines the exposure of an economy to the rest of the world, whereas the capital and financial account explains how it is financed. An article on foreign direct investment provides more information on one component of the financial account, while an article on international trade in services focuses on one component of the current account.
- 1 Main statistical findings
- 2 Data sources and availability
- 3 Context
- 4 See also
- 5 Further Eurostat information
- 6 External links
Main statistical findings
The current account surplus of the EU-28 was EUR 155 700 million in 2013 (see Figure 1), corresponding to 1.2 % of gross domestic product (GDP). This can be contrasted with data for 2012, when the current account surplus was EUR 68 600 million. The latest developments for the EU-28’s current account showed a continuation of the pattern established in 2009: the current account deficit peaked in 2008 at 2.2 % of GDP; progressively smaller deficits were recorded between 2009 and 2011, turning to a surplus equivalent to 0.5 % of GDP in 2012. The current account surplus for 2013 comprised a deficit for current transfers (-0.6 % of GDP) with surpluses in the current accounts for goods (0.2 % of GDP), services (1.3 %) and the income account (0.3 %) — see Table 2.
There were 10 EU Member States that reported current account deficits in 2013, while 18 recorded surpluses (see Table 1). The largest deficit (relative to GDP) was in the United Kingdom (-4.4 %), followed by Cyprus (-1.9 %) and Belgium (-1.6 %), while the Netherlands (10.4 % of GDP) reported the largest surplus, followed by Germany (7.5 %) and Denmark (7.3 %). Germany was the only EU Member State to report a current account deficit for services in 2013, while Luxembourg (52.5 % of GDP), Malta (20.1 %), Cyprus (19.7 %) and Croatia (15.7 %) reported relatively large surpluses. A total of 16 EU Member States reported a deficit for goods — most notably the same four Member States that reported the largest surpluses for services — while Ireland reported the largest surplus relative to GDP (19.6 %).
Among the partner countries and regions shown in Figure 2, the EU-28’s current account deficit was largest with China, standing at EUR 95 000 million in 2013, almost twice as large as the deficit with Russia (EUR 53 900 million) and close to nine times the deficit with Japan (these latter two countries accounted for the second and third largest EU-28 current account deficits). The highest current account surplus was recorded with the United States (EUR 121 500 million), approximately twice as high as the surplus with Switzerland (EUR 66 500 million), while surpluses were also registered with Brazil, Hong Kong, Canada and India.
Three types of investment (direct investment (FDI), portfolio and other investment) make-up the financial account, along with financial derivatives and reserve assets. A positive value for the financial account indicates that inward investment flows (inward FDI, portfolio and other investment liabilities) exceed reserve assets and outward investment flows (outward FDI, portfolio and other investment assets). This was the case for eight EU Member States in 2013, with the highest value relative to GDP reported by the United Kingdom (4.1 % of GDP), while 20 EU Member States had a negative financial account. The euro area recorded a negative financial account, standing at -2.6 % of GDP in 2013, with net outflows recorded for direct and other investments.
As can be seen in Table 4, the EU-28 had a relatively balanced position concerning direct investment vis-à-vis the rest of the world in 2013: outward flows of FDI represented 2.6 % of GDP, while inward flows of FDI represented 2.5 % of GDP. The effect of the financial and economic crisis was apparent in relation to levels of direct investment. Both outward and inward investment peaked in 2007 and fell sharply in 2008. After further falls for outward investment in 2009 and 2010, and a more mixed development for inward investment, by 2011, both inward and outward investment reported increased levels of investment compared with the year before. In 2012, the level of investment in both directions fell again, followed by a small rebound in investment in 2013. By 2013, outward investment remained 39.5 % below its 2007 peak level, while inward investment remained 26.1 % lower than its peak in the same year.
Luxembourg recorded by far the highest levels of both inward and outward FDI (in relation to GDP), followed by Ireland. Luxembourg also recorded the highest level of FDI transactions in absolute terms (see Table 3) for outward flows (followed by Germany, the Netherlands, Sweden and Italy), as well as for inward flows (followed by Spain, the United Kingdom and Ireland).
Contrary to FDI flows, the EU-28 consistently recorded net inflows of portfolio investment between 2004 and 2013, with the exception of 2012. Portfolio investment assets (outward investment) were equivalent to 2.8 % of GDP in 2013, while portfolio investment liabilities (inward investment) were valued at 4.0 % of GDP. In 2013, portfolio investment liabilities returned to its position as the most important source of inward capital coming into the EU, having fallen below direct investment in 2011 and 2012, as its value in 2013 more than doubled when compared with 2012. Portfolio investment assets recorded a slight contraction (-4.4 %). Eight of the EU Member States recorded disinvestment for portfolio assets in 2013, with particularly large flows for Cyprus (73.0 % of GDP). The largest investments in portfolio assets in relative terms were recorded in Luxembourg (-336.5 % of GDP), Ireland (-57.6 %) and Malta (-32.8 %) and in absolute values in Luxembourg and Germany (both in excess of EUR -100 000 million). Disinvestment in portfolio liabilities was less common, apparent in Germany, Portugal, Cyprus, Lithuania, the Netherlands and Greece, as well as in Iceland. In absolute terms, the largest disinvestments in portfolio liabilities in 2013 were recorded in Germany and the Netherlands. Luxembourg again reported the largest positive flows (relative to GDP) at 500.4 %, followed by Ireland (31.5 %), while in absolute terms inflows were highest in Luxembourg and France.
For other assets and liabilities (such as currency and deposits, loans and trade credit) the EU-28 recorded net capital outflows equivalent to 2.5 % of GDP in 2013. Investment in other assets was equal to 1.1 % of the EU-28’s GDP, with the largest investments (in relative terms) recorded for Luxembourg, while there was substantial disinvestment recorded for Cyprus and Ireland. Disinvestment in other liabilities was equivalent to 1.4 % of GDP in the EU-28 in 2013. The largest investments in relative terms were recorded in Malta and Luxembourg, with substantial disinvestment recorded in Cyprus. Net outflows of other investments to the EU-28 were valued at EUR 325 960 million in 2013, comparing with net inflows of EUR 10 770 million in 2012. Net other outflows were higher in 2013 than in any year since 2008 when they peaked at EUR 551 270 million. Six EU Member States had net other investment inflows in 2013, most notably the United Kingdom, Ireland and Malta.
Data sources and availability
The main methodological reference used for the production of balance of payment statistics is the fifth balance of payments manual (BPM5) of the International Monetary Fund (IMF). The sixth edition of this manual (BPM6) was finalised in December 2008 and its implementation will take place in 2014. This new set of international standards has been developed, partly in response to important economic developments, including an increased role for globalisation, rising innovation and complexity in financial markets, and a greater emphasis on using the balance sheet as a tool for understanding economic activity.
The transmission of balance of payments data to Eurostat is covered by Regulation 184/2005 on Community statistics concerning balance of payments, international trade in services and foreign direct investment (of which there is a consolidated version, dating from 9 May 2006). New data requirements according to the BPM6 manual are included in Commission Regulation no 555/2012 of 22 June 2012.
The current account of the balance of payments provides information not only on international trade in goods (generally the largest category), but also on international transactions in services, income and current transfers. For all these transactions, the balance of payments registers the value of credits (exports) and debits (imports). A negative balance — a current account deficit — shows that a country is spending abroad more than it is earning from transactions with other economies, and is therefore a net debtor towards the rest of the world.
The current account gauges a country’s economic position in the world, covering all transactions that occur between resident and non-resident entities. More specifically, the four main components of the current account are defined, according to the BPM5, as follows.
- International trade in goods covers general merchandise, goods for processing, repairs on goods, goods procured in ports by carriers, and non-monetary gold. Exports and imports of goods are recorded on a so-called fob/fob basis — in other words, at market value at the customs frontiers of exporting economies, including charges for insurance and transport services up to the frontier of the exporting country.
- International trade in services consists of the following items: transport services performed by EU residents for non-EU residents, or vice versa, involving the carriage of passengers, the movement of goods, rentals of carriers with crew and related supporting and auxiliary services; travel, which includes primarily the goods and services EU travellers acquire from non-EU residents, or vice versa; and other services, which include communication services, construction services, insurance services, financial services, computer and information services, royalties and licence fees, other business services (which comprise merchanting and other trade-related services, operational leasing services and miscellaneous business, professional and technical services), personal, cultural and recreational services, and government services not included elsewhere.
- Income covers two types of transactions: compensation of employees paid to non-resident workers or received from non-resident employers, and investment income accrued on external financial assets and liabilities.
- Current transfers include general government current transfers, for example transfers related to international cooperation between governments, payments of current taxes on income and wealth, and other current transfers, such as workers’ remittances, insurance premiums (less service charges), and claims on non-life insurance companies.
Under the balance of payment conventions, transactions which represent an inflow of real resources denoting exports of goods and services, a decrease in assets, or an increase in liabilities are recorded as credits, and transactions representing an outflow of real resources denoting imports of goods and services, an increase in assets, or a decrease in liabilities are recorded as debits. Net is the balance (credits minus debits) of all transactions with each partner.
The financial account of the balance of payments covers all transactions associated with changes of ownership in the foreign financial assets and liabilities of an economy. The financial account is broken down, according to the BPM5, into five basic components: direct investment, portfolio investment, financial derivatives, other investment, and reserve assets. Direct investment implies that a resident direct investor in one economy has a lasting interest in, and a degree of influence over the management of, a business direct investment enterprise resident in another economy. Direct investment is classified primarily on a directional basis: resident direct investment abroad and non-resident direct investment in the reporting economy. Within this classification three main components are distinguished: equity capital, reinvested earnings, and other capital; these are discussed in more detail in an article on foreign direct investment.
Portfolio investment records the transactions in negotiable securities with the exception of the transactions which fall within the definition of direct investment or reserve assets. Two main components are identified: equity securities and debt securities (bonds and notes or money market instruments).
Financial derivatives are financial instruments that are linked to, and whose value is contingent to, a specific financial instrument, indicator or commodity, and through which specific financial risks can be traded in financial markets in their own right. Transactions in financial derivatives are treated as separate transactions, rather than integral parts of the value of underlying transactions to which they may be linked.
Other investment is a residual category, which is not recorded under the other headings of the financial account (direct investment, portfolio investment, financial derivatives or reserve assets). It also encompasses the offsetting entries for accrued income on instruments classified under other investment. Four types of instruments are identified: currency and deposits (in general, the most significant item), trade credits, loans, other assets and liabilities.
Reserve assets are foreign financial assets available to, and controlled by, monetary authorities; they are used for financing and regulating payments imbalances or for other purposes.
The EU is a major player in the global economy for international trade in goods and services, as well as foreign investment. Balance of payments statistics give a complete picture of all external transactions for the EU and its individual Member States. Indeed, these statistics may be used as a tool to study the international exposure of different parts of the EU’s economy, indicating its comparative advantages and disadvantages with the rest of the world.
The financial and economic crisis underlined the importance of developing such economic statistics insofar as improvements in the availability of data on the real and financial economies of the world may have helped policymakers and analysts as the crisis unfolded; for example, if internationally comparable information about financial asset and liability flows and their impact on production, employment, and income had been available.
The European Commission revealed new policy proposals in this domain in the aftermath of the financial and economic crisis — aiming to establish legislation designed to stimulate the economic recovery and promote a more open, global economy. It is hoped these changes will lead to benefits in terms of increased demand for goods and services from the EU, wider choice (and perhaps lower prices) for consumers within the EU, as well as greater security for businesses to invest abroad and in the EU, and therefore act as an important driver for economic growth and job creation.
The European Commission launched a blueprint for EU trade policy in the summer of 2010, with a variety of initiatives aimed at: keeping markets open; concluding the Doha round of WTO negotiations; encouraging international investment flows; and removing regulatory barriers that prevent trade. Trade policy was outlined as a driver of prosperity in a Communication titled ‘Trade, growth and world affairs: trade policy as a core component of the EU’s 2020 strategy’ (COM(2010) 612 final). The summer of 2010 also saw the European Commission take its first steps towards developing a new investment policy for the EU — introducing a Communication titled ‘Towards a comprehensive European international investment policy’ (COM(2010) 343 final). This explored how investment policy could contribute towards growth and help reach the Europe 2020 strategy goals of smart, sustainable and inclusive growth. At the same time, the European Commission also adopted proposals to establish transitional arrangements for bilateral investment agreements between Member States and third countries, and this was adopted as Regulation 1219/2012 by the European Parliament and Council on 12 December 2012.
In July 2013, talks started between the EU and the United States concerning the Transatlantic Trade and Investment Partnership (TTIP), which aims to remove trade barriers in a wide range of sectors to make it easier to buy and sell goods and services between the two parties. As well as cutting tariffs, the talks also concern cutting other barriers, such as those caused by technical regulations, standards and approval procedures. The negotiations are not just focused on goods, but also look at services, investment, and public procurement.
- Foreign affiliates statistics - FATS
- Foreign direct investment statistics
- Global value chains - international sourcing to China and India
- International trade in goods
- International trade in services
- The EU in the world - economy and finance
Further Eurostat information
- EU-27 current account deficit fell to EUR 128 bn in 2009 — Statistics in focus 32/2010
- EU and Member States' balance of payments during the economic turmoil — Statistics in focus 32/2012
- EU economic data pocketbook — Issue number 1/2010 (quarterly)
- EU remittances back on the increase in 2010 — Statistics in focus 4/2012
- International trade and foreign direct investment — Pocketbook, 2013 Edition
- Remittances from the EU down for the first time in 2009, flows to non-EU countries more resilient — Statistics in focus 40/2010
- Balance of payments statistics and International investment positions (t_bop_q)
- Balance of payments statistics and International investment positions (bop_q)
Methodology / Metadata
- Asymmetries in EU current account data (publication, December 2006)
- Balance of payments - international transactions (ESMS metadata file — bop_esms)
- Balance of payments statistics and international investment positions (ESMS metadata file — bop_q_esms)
- Differences between balance of payments and foreign trade statistics (publication, August 2004)
Source data for tables and figures (MS Excel)
- International Monetary Fund — Balance of Payments Manual — 5th edition, 1993
- International Monetary Fund — Balance of Payments and International Investment Position Manual — 6th edition, 2009
- Main changes in the Sixth Edition of the IMF's Balance of Payments and International Investment Position Manual