Euro area balance of payments (October 2008)

In October 2008 the working day and seasonally adjusted current account of the euro area recorded a deficit of EUR 6.4 billion. In the financial account, combined direct and portfolio investment showed net inflows of EUR 108 billion.

The working day and seasonally adjusted current account of the euro area recorded a deficit of EUR 6.4 billion in October 2008 (corresponding to a deficit of EUR 4.8 billion in non-adjusted terms). This reflected deficits in current transfers (EUR 9.7 billion) and income (EUR 0.4 billion), which were only partly offset by surpluses in services (EUR 2.8 billion) and goods (EUR 1.0 billion).

The 12-month cumulated, working day-adjusted current account up to October 2008 recorded a deficit of EUR 42.5 billion (about 0.5% of euro area GDP), compared with a surplus of EUR 48.9 billion a year earlier. This shift was due to a decrease in the surplus in goods (from EUR 66.1 billion to EUR 3.9 billion), a shift in the income account from surplus (EUR 14.8 billion) to deficit (EUR 8.5 billion), and an increase in the deficit in current transfers (from EUR 83.6 billion to EUR 90.9 billion). Conversely, the services surplus increased from EUR 51.6 billion to EUR 53.0 billion.

In the financial account, combined direct and portfolio investment showed net inflows of EUR 108 billion in October 2008, owing to net inflows in portfolio investment (EUR 122 billion) that significantly exceeded the net outflows in direct investment (EUR 14 billion).

The net outflows in direct investment resulted from net outflows in both equity capital and reinvested earnings (EUR 10 billion) and other capital (mostly inter-company loans) (EUR 5 billion).

Portfolio investment recorded net inflows in both debt instruments (EUR 116 billion) and equity (EUR 5 billion). The developments in debt instruments were characterised by net sales of foreign instruments by euro area residents and net purchases of euro area debt instruments by non-residents.

Financial derivatives recorded net inflows of EUR 24 billion.

Other investment showed net outflows of EUR 48 billion, mainly as a result of net outflows in MFIs (excluding the Eurosystem) (EUR 206 billion) that were only to a certain extent counterbalanced by net inflows in the Eurosystem (EUR 138 billion), other sectors (EUR 14 billion) and general government (EUR 6 billion). The large net inflows in the Eurosystem were related mainly to the reciprocal currency arrangements (swap lines) between the European Central Bank (ECB) and central banks outside the euro area.

Reserve assets increased by EUR 9 billion (excluding valuation effects). The stock of the Eurosystem’s reserve assets stood at EUR 368 billion at the end of October 2008.

In the 12-month period to October 2008 combined direct and portfolio investment showed cumulated net inflows of EUR 5 billion, compared with net inflows of EUR 123 billion a year earlier. This reduction resulted largely from an increase in net outflows in direct investment (from EUR 128 billion to EUR 218 billion, reflecting lower net foreign investment in the euro area in equity capital and reinvested earnings (from EUR 239 billion to EUR 70 billion).

In addition to the balance of payments for October 2008, this press release incorporates revisions for September 2008. In non-adjusted terms, those revisions have resulted in a lower current account deficit (a reduction from EUR 6.0 billion to EUR 4.2 billion) and in a decrease in the net inflows in portfolio investment (from EUR 57 billion to EUR 44 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 October 2008 will also be published in the January 2009 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 27 January 2009.

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.