Euro Area Balance of Payments (July 2008)

In July 2008 the working day and seasonally adjusted current account of the euro area recorded a deficit of EUR 1.7 billion. In the financial account, combined direct and portfolio investment showed net outflows of EUR 19 billion

The working day and seasonally adjusted current account of the euro area recorded a deficit of EUR 1.7 billion in July 2008 (corresponding to a deficit of EUR 1.1 billion in non-adjusted terms). This reflected deficits in current transfers (EUR 6.8 billion) and goods (EUR 1.6 billion) which were only partly offset by surpluses in services (EUR 4.4 billion) and income (EUR 2.3 billion).

The 12-month cumulated, working day-adjusted current account up to July 2008 recorded a deficit of EUR 23.9 billion (about 0.3% of euro area GDP), compared with a surplus of EUR 27.4 billion a year earlier. This shift was mainly due to a decrease in the surplus in goods (from EUR 55.8 billion to EUR 21.4 billion), an increase in the deficit in current transfers (from EUR 79.0 billion to EUR 94.8 billion) and, to a lesser extent, a shift from surplus to deficit in the income account (from EUR 6.0 billion to EUR 1.4 billion). Conversely, the services surplus increased from EUR 44.6 billion to EUR 50.9 billion.

In the financial account, combined direct and portfolio investment recorded net outflows of EUR 19 billion in July 2008, reflecting net outflows both in direct investment (EUR 15 billion) and in portfolio investment (EUR 5 billion).

The net outflows in direct investment resulted largely from net outflows in equity capital and reinvested earnings (EUR 16 billion).

Portfolio investment recorded in particular net outflows in money market instruments (EUR 6 billion), which reflected the fact that net purchases of foreign short-term debt securities by euro area residents (EUR 11 billion) were partly offset by net purchases of euro area short-term debt securities by non-residents (EUR 4 billion).

Financial derivatives recorded net inflows of EUR 2 billion.

Other investment showed net inflows of EUR 14 billion, mainly as a result of net inflows in general government (EUR 12 billion) and MFIs excluding the Eurosystem (EUR 8 billion), which were only partly offset by net outflows in other sectors (EUR 6 billion).

Reserve assets increased by EUR 2 billion (excluding valuation effects). The stock of the Eurosystem’s reserve assets stood at EUR 356 billion at the end of July 2008.

In the 12-month period to July 2008 combined direct and portfolio investment showed cumulated net outflows of EUR 97 billion, compared with net inflows of EUR 232 billion a year earlier. This shift largely resulted from a decline in net inflows in portfolio investment (from EUR 392 billion to EUR 121 billion), which in turn mainly reflected a reduction in net purchases of euro area securities by non-resident investors (from EUR 969 billion to EUR 356 billion).

In addition to the balance of payments for July 2008, this press release incorporates revisions for June 2008. Those revisions have resulted for that month in a shift from deficit to surplus in the current account (EUR 1.1 billion instead of EUR 1.0 billion, in non-adjusted terms), and in a reduction of net inflows in combined direct and portfolio investment from EUR 32 billion to EUR 29 billion.

A complete set of updated euro area balance of payments and international investment position statistics 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 balance of payments time series, can be downloaded from the ECB’s Statistical Data Warehouse (SDW). Data up to July 2008 will also be published in the October 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 press release on the euro area monthly balance of payments will be published on 23 October 2008.

Table 1: Current account of the euro area – working day and seasonally adjusted data.

Table 2: Monthly balance of payments of the euro area – non-seasonally adjusted data.