Monthly developments in September 2000 and international investment position as at end-1999

During the first three quarters of this year, the current account of the euro area recorded a cumulative deficit of EUR 20.4 billion, compared with a surplus of EUR 0.7 billion for the same period last year. The main reason was a reduction of EUR 21 billion in the goods surplus (from EUR 62.5 billion to EUR 41.5 billion). This, in turn, reflects a stronger increase of import values (26.4% as compared with the same period of last year) than export values (20%). With respect to other items in the financial account, there were net inflows in financial derivatives, amounting to EUR 2.0 billion in September 2000. In addition, there were net inflows in other investment, amounting to EUR 20.6 billion. Reserve assets decreased by EUR 4.2 billion in September 2000 (excluding valuation effects). Errors and omissions amounted to EUR 4.3 billion in September 2000.

In September 2000, the current account of the euro area recorded a deficit of EUR 1.5 billion compared with a deficit of EUR 3.3 billion for the same month last year. This change reflects a reduction in the deficit on current transfers (from EUR 5.4 billion to EUR 3.4 billion) and a small decrease in the income deficit, which more than compensated for an increase in the deficit for services and a reduction in the goods surplus (see Table 1). In the financial account, direct investment recorded net outflows of EUR 34.3 billion in September 2000, reflecting direct investment abroad by euro area residents of EUR 47.2 billion and inward direct investment of EUR 13.0 billion. About one third of the net outflows was related to the item "other capital" which reflects mostly intercompany loans. In contrast, there were net portfolio investment inflows of EUR 3.9 billion in September. These reflected net inflows in debt instruments (EUR 8.7 billion) which more than offset the net outflows in equities (EUR 4.8 billion). In the first nine months of 2000, there were combined net direct and portfolio investment outflows of EUR 89.1 billion. This was less than in the corresponding period last year (EUR 113.0 billion). As in earlier periods of the year, the main components of these outflows continued to be net direct investment and portfolio equity transactions (totalling EUR 205.3 billion over the period as compared to EUR 112.2 billion in the corresponding months of 1999). At the same time, there were net inflows in debt instruments of EUR 116.2 billion, contrasting with a nearly balanced flow, of - EUR 0.8 billion, in the first nine months of 1999. In particular, there was a swing in bonds and notes from net outflows in the first three quarters of 1999 (EUR 46.6 billion) to net inflows in the corresponding period of 2000 (EUR 78.5 billion), reflecting both substantially lower investment in foreign bonds and notes by euro area residents and significantly more purchases of euro area bonds and notes by non-residents.

Euro area international investment position as at end-1999

The euro area international investment position as at end-1999 recorded net liabilities of EUR 131.0 billion (2.1% of GDP), as compared with EUR 175.3 billion (3% of GDP) at the end of 1998 (see Table 2).

Note on statistics produced by the Eurosystem in respect of the balance of payments (b.o.p.) of the euro area

The results for September 2000 will also be published in the December 2000 issue of the

The international investment position of the euro area vis-à-vis the rest of the world reports the net external position of stocks in direct and portfolio investment, financial derivatives, other investment and reserve assets, thereby complementing the b.o.p. statistics, which record flows of assets and liabilities in the financial account. The changes in the international investment position between year-ends are partly explained by the bop flows of the intervening year. In addition, the stock data also reflect valuation effects arising from changes in asset prices and exchange rates and other changes not related to flows. The reduction of EUR 44.3 billion in the international investment position net liabilities between 1998 and 1999 is the result, on the one hand, of an increase in net assets in both direct investment (by EUR 237.0 billion) and reserves (by EUR 43.1 billion). On the other hand, it reflects an increase in net liabilities in portfolio investment (by EUR 26.3 billion) and a change (by EUR 209.3 billion) from net assets to net liabilities in "other investment". The methodology has been developed in close co-operation with the European Commission (Eurostat) which publishes the b.o.p. for the European Union. The ECB compiles these statistics on the basis of the data on extra-euro area transactions reported by euro area countries.

ECB Monthly Bulletin

Note on statistics on the international investment position of the euro area

Annex

. A detailed methodological note on euro area b.o.p. statistics is available on the ECB's website. The revisions of previously published figures for 1997 and 1998 mainly result from methodological enhancements in the compilation of the euro area international investment position.

Table 1 Table 2

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- Monthly balance of payments of the euro area for 1999 and 2000; - Euro area international investment position as at end-1999; Reproduction is permitted provided that the source is acknowledged