Executive summary

This biennial report provides a quality review of the national balance of payments (b.o.p.), international investment position (i.i.p.) and international reserves template of the Eurosystem (international reserves), as well as the associated euro area aggregates.^[1] The report fulfils the formal requirement for the Executive Board of the European Central Bank (ECB) to inform its Governing Council of the quality of these statistics, as set out in Article 6(1) of Guideline ECB/2011/23 (hereinafter, the ECB Guideline on external statistics).^[2] Furthermore, the report provides information supporting the macroeconomic imbalance procedure (MIP) data quality assurance process, as laid down in the Memorandum of Understanding between Eurostat and the European Central Bank/Directorate General Statistics on the quality assurance of statistics underlying the Macroeconomic Imbalance Procedure (the MoU).

The main principles and elements guiding the production of ECB statistics are set out in the ECB Statistics Quality Framework (SQF) and quality assurance procedures, which are published on the ECB’s website. ^[3] This report therefore provides a quality analysis of the statistical output covering: (i) methodological soundness; (ii) timeliness and punctuality; (iii) data and metadata availability; (iv) accuracy and reliability; (v) internal consistency (validation, and net errors and omissions); (vi) external consistency/coherence with other comparable statistical domains (euro area accounts, foreign trade in goods statistics, monetary financial institution (MFI) balance sheet items, money market fund (MMF), investment fund (IF) and securities holdings statistics); and (vii) asymmetries (intra-euro area and bilateral asymmetries).

The descriptive and quantitative indicators used throughout this report are based on quarterly and monthly data transmitted up to 31 October 2023. The last reference period included in the analysis is Q2 2023 for quarterly data, or June 2023 for monthly data. Supporting tables and charts are provided in Annex 1, while details of how the indicators are computed can be found in Annex 2.

Given the specific MIP requirements and the responsibilities entrusted to the ECB under the MoU, the MIP Box at the end of the main body of the report presents some of the indicators used to measure the fitness for purpose of the data for all EU Member States. The box draws on annual data up to 2022 and revisions up to 2021, and focuses on the following quality dimensions: (i) data availability and confidentiality; (ii) sources and methods; (iii) accuracy and reliability; (iv) internal consistency; and (iv) external consistency.

Statistical developments

This section highlights some of the statistical developments that have occurred since publication of the Quality Report 2021.

Following Croatia’s adoption of the euro on 1 January 2023, b.o.p. and i.i.p. data for the enlarged euro area were released for the first time in March 2023, starting from the January 2013 reference period. The changes in the euro area aggregate required close cooperation with national compilers, in particular those from Croatia, given that the back data reported by Croatia had to be incorporated into the enlarged euro area-20 aggregate statistics. Moreover, national data reflecting the new composition (euro area 20) had to be included, either based on revised country transmissions or derived by the ECB by applying an estimation method. The enlargement of the euro area also means that a detailed assessment of Croatia's b.o.p. and i.i.p. data is now part of this Quality Report.

Since April 2023 the ECB has published euro area time series for the additional details requested pursuant to the amendment introduced by Guideline ECB/2018/19, starting from the Q1 2019 reference period. These series include additional details by sector, instrument and geographic counterpart that address many of the most pressing outstanding user needs. The analytical value of the new details is particularly visible in the more granular sector breakdowns, revealing substantial heterogeneity within the financial sector other than MFIs and the non-financial sector, and in terms of increased geographical coverage.^[4] Looking ahead, the provision of longer time series remains key to improving value to users. In support of this goal, the roadmap agreed with the European System of Central Banks (ESCB) Statistics Committee (STC) requires national compilers to provide, by September 2024 at the latest, the main time series for the additional details starting from the Q1 2013 reference period. Croatia, Estonia, Finland, Italy, Latvia, Luxembourg, Portugal and Slovenia have already provided the full set of back data ahead of this deadline.

Efforts continued within the ESCB to provide data on Special Purpose Entities (SPEs) in the external statistics. Under the amendment introduced by Guideline ECB/2022/23 in May 2022 requiring separate information on SPEs to be included in b.o.p. and i.i.p. statistics, mandatory data collection started in March 2023, with the reference data for Q4 2022, while the back data from Q1 2020 was requested to be transmitted by September 2023. Euro area aggregates and national publishable data on SPEs were published for the first time in April 2024.

The ESCB has progressed with its activities to enhance the monthly b.o.p. statistics given the importance of higher frequency data for the ECB decision-making bodies. The ECB is organising webinars devoted to specific aspects of monthly b.o.p. statistics compilation in which national experts can share best practices with experts of interested countries seeking to implement similar approaches to overcome deficiencies existing within their own systems.

In October 2023 the ECB released a revamped and updated electronic version of the EU Balance of Payments and International Investment Position statistical sources and methods (the B.o.p. and i.i.p. e-book). The B.o.p. and i.i.p. e-book is organised by topic (rather than by country), providing an overview of general methodological aspects and highlighting the commonalities and specific deviations of country sources and methods in a harmonised format.

Within the ESCB, the Working Group on External Statistics (WG ES) and the Working Group on Financial Accounts and Government Finance Statistics (WG FGS), along with other Statistics Committee (STC) substructures, are working together closely on the following common issues:

• eliminating the remaining inconsistencies between the national b.o.p and i.i.p. statistics and the rest of the world account and supporting the review of the System of National Accounts (SNA) and Balance of Payments Manual (BPM);
• implementing the plan towards compiling data on foreign-controlled non-financial corporations (FCCs), as approved by the STC in June 2023;
• following-up on the conclusions and recommendations of the final report of the Virtual Group on Unlisted Equity, taking into account the clarifications given by the Task Force on Foreign Direct Investment (FDI).

Further improvements to data quality have been made by countries in capturing the activities of SPEs (e.g. Malta supplemented the annual survey with a new administrative data source). Cyprus, Ireland and Malta have started to report relevant figures for the new FDI breakdown by debt instrument, and in the Netherlands, a new method for estimating quarterly figures has improved the geographical allocation and the stock/flow reconciliation. Regarding the compilation of financial derivatives data, Luxembourg has started to report consistent stock and flow data for MFIs and has improved the coverage of resident captive financial institutions, while Germany has started reporting transactions in financial derivatives for the government sector.

This notwithstanding, there is still room for further improvement of the various quality dimensions analysed in this report. For example, in terms of methodological soundness, Malta continues to face certain challenges in seeking to improve the general quality of its data, enhance SPE data collection (e.g. geographical details) and eliminate breaks in the data. Cyprus and Luxembourg need to extend SPE coverage further. With regard to services, feedback from countries is needed to assess the materiality of service margins on buying and selling financial assets and the consequent need to start recording these services if the data are material.

In terms of functional classification, a number of countries are not yet able to classify as direct investment (the appropriate functional category) transactions and related positions in debt securities between companies engaged in a direct investment relationship. Furthermore, the recording of trade credits between companies in a direct investment relationship under other investment instead of under direct investment is still an issue for Spain^[5] and Luxembourg.

Concerning internal consistency, a large majority of countries provide the ECB with fully consistent data. However, Malta needs to ensure regular compliance with the validation and integrity rules for quarterly b.o.p. and i.i.p. data, while Germany needs to ensure the proper geographical allocation for transaction and position and avoid the use of “W19 Rest of the World (non-allocated geographically)”.

With regard to consistency and coherence with other datasets, b.o.p. and i.i.p. data are in line with other datasets overall, thus ensuring comparability across statistical domains. However, it continues to be of utmost importance that all countries follow the agreed steps to ensure full consistency vis-à-vis balance sheet items (BSI) statistics and sectoral accounts. In terms of other datasets, the ECB encourages b.o.p. and i.i.p. colleagues to interact with their counterparts to structurally reduce discrepancies and/or to reconcile and document differences between datasets where there are objective methodological differences.

Table 1 below provides a list of notable issues affecting certain euro area countries, as well as the scope for improvement, based on the analysis carried out in the following chapters.