Balance of payment statistics
- Data extracted in April 2017. Most recent data: Further Eurostat information, Main tables and Database. Planned article update: May 2018.
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. Data are presented in regard to the new compilation standard of the IMF’s sixth balance of payments manual (BPM6).
The balance of the current and capital accounts balance determine the exposure of an economy to the rest of the world, whereas the financial account explains how it is financed. Ideally, the balance of the current and capital accounts should equal the total net of the financial account, otherwise net errors and omissions were recorded. 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 258.5 billion in 2016 (see Figure 1), corresponding to 1.7 % of gross domestic product (GDP). By comparison, in 2015 the current account surplus was EUR 175.5 billion. The latest developments for the EU-28’s current account show a continuation of the pattern established since 2008: while the current account deficit peaked in 2008 at 2.1 % of GDP, it gradually diminished, and in 2012 turned into a surplus equivalent to 0.6 % of GDP; the surplus was equivalent to 1.0 % of GDP in 2014 and 1.2 % in 2015. The current account surplus of the EU-28 for 2016 was based on firm surpluses in the component accounts for goods (1.2 % of GDP), services (0.9 % of GDP) and to a lesser extent for primary income (0.2 % of GDP), while secondary income (-0.5 % of GDP) balanced slightly negatively — see Figure 3.
Among the partner countries and regions shown in Figure 2, the EU-28’s current account deficit was largest with China, standing at EUR 112.5 billion in 2016, followed by Russia (EUR 19.3 billion) and Japan (EUR 6.6 billion). On the other hand, the highest current account surpluses were recorded with the United States (EUR 164.8 billion) and Switzerland (EUR 53.7 billion). Smaller surpluses were recorded with Brazil, Hong Kong, Canada and India.
There were 10 EU Member States that reported current account deficits in 2016, while 18 recorded surpluses (see Figure 3 and Table 1). The largest deficits (relative to GDP) were observed in Cyprus (5.3 %) and the United Kingdom (4.4 %), while the Netherlands and Germany reported the largest surpluses relative to GDP in their current accounts (8.4 % and 8.3 %), followed by Denmark (8.1 %) and Malta (7.9 %). In absolute terms Germany recorded by far the largest current account surplus (EUR 261.4 billion).
When regarding the components in detail the EU-28's current account surplus with the rest of the world is firmly built upon positive balances in the goods and services accounts (EUR 174.4 billion and EUR 130.2 billion) and to some further extent in the primary income (EUR 32.2 billion) — see Table 1. In absolute terms Germany (EUR 271.7 billion), Ireland (EUR 103.0 billion), the Netherlands (EUR 78.5 billion), and Italy (EUR 60.7 billion) were the most prominent net exporters in goods to other countries, while more than half of the 28 Member States (i.e. 15 countries) faced negative balances in their goods accounts in 2016. Among those is the United Kingdom as the major net importer of goods (EUR 163.6 billion). However, the same major net exporting economies in goods appear respectively as net importers in services in 2016, and vice versa: while Germany (EUR -22.4 billion), Ireland (EUR -41.3 billion), the Netherlands (EUR -2.9 billion), and Italy (EUR -3.6 billion) observed negative balances in their services accounts, the United Kingdom was the major net exporter of services (EUR 118.4 billion) to the rest of the world.
Among EFTA countries, Norway and Switzerland reported considerable current account surpluses in 2016 (Switzerland EUR 63.8 billion, Norway EUR 16.4 billion). This was supported by surpluses for goods in both countries (Switzerland EUR 48.1 billion, Norway EUR 13.9 billion) and a significant influx of primary income flows in Norway (EUR 18.2 billion) and a surplus for services in Switzerland (EUR 17.3 billion), respectively.
Altogether 13 Member States recorded surpluses for goods in 2016, while 23 Member States recorded surpluses for services with the rest of the world — see Figure 3. Among those with the largest relative exposure were Ireland (38.7 % of GDP), the Netherlands (11.3 % of GDP) and Germany (8.7 % of GDP) for goods, and Luxembourg (38.0 % of GDP), Malta (30.9 %) and Cyprus (21.5 %) for services. The net importing economies with largest relative exposure were Cyprus (21.5 % of GDP), Malta (18.9 % of GDP) and Croatia (15.5 % of GDP) for goods in 2016, and Ireland (15.5 % of GDP) for services.
On average more than half of the EU-28 Member States' trade in goods and services in 2016 related to trade with other EU partners — see Figure 4. Cross-border trade in goods with EU partners was highest in Luxembourg (81.4 %) and lowest in the United Kingdom (52.1 %) and Malta (51.0 %). Cross-border trade in services with EU partners was highest in Slovakia (81.6 %) and lowest in the Ireland (39.2 %) and Malta (38.0 %).
Traditionally the capital account of the EU-28 records a deficit, with considerable capital transfers to the rest of the world. In 2016, this trend was continued however at a lower pace with a capital account deficit of EUR 19.5 billion, equivalent to 0.1 % of GDP — see Table 1. This was mainly built upon large capital account deficits in Ireland (EUR 5.6 billion), Italy (EUR 2.1 billion), the Netherlands (EUR 1.8 billion) and United Kingdom (EUR 2.2 billion).
Three types of investment (direct investment or FDI, portfolio and other investment) consolidate the financial account along with (net) financial derivatives and reserve assets. Assets and liabilities are interpreted as net values (net acquisition of assets, net incurrence of liabilities). Accordingly, the net financial account is interpreted as net lending to the rest of the world when positive, and net borrowing from the rest of the world when negative.
A total of 20 EU Member States were net lenders to the rest of the world in 2016, showing surpluses in their net financial accounts, with the highest value relative to GDP reported by Malta (20.0 % of GDP). 7 EU Member States appeared to be net borrowers, among those are Cyprus (-5.9 % of GDP) and Sweden (-2.6 % of GDP). Note that one Member States decided not to publish its net exposure in the financial accounts (United Kingdom) — see Figure 5.
In absolute terms, the largest net lender, by far, in the EU-28 was Germany, with net lending of EUR 231.3 billion in 2016 (see Table 2). This contributed considerably to the EU-28 and the euro area's status as net lender to the rest of the world with EUR 149.7 billion (EU-28) and EUR 352.7 billion (euro area) of net lending, equivalent to 1.0 % of EU-28 GDP and 3.3 % of euro area GDP. The euro area financial surplus was sustained by net acquisitions of foreign assets during 2016 in direct and portfolio investment (EUR 326.7 billion and EUR 395.3 billion) which were significantly higher than the corresponding net incurrences of liabilities in these components. The latest data also confirm that the major hubs for financial account transactions in the EU-28 in 2016 were Germany, Luxembourg, the Netherlands, Ireland and the United Kingdom.
Germany, as the largest net lender in the EU-28, showed high levels of net acquisitions in direct and portfolio investment assets, and dynamically increased its asset positions with the rest of the world during 2016, while reducing its outstanding portfolio investment liabilities (net redemption of EUR 111.3 billion). On the other hand, the United Kingdom significantly reduced both its outstanding liabilities in other investment (net redemption of EUR 149.6 billion) and its portfolio investment assets (net sale of EUR 198.4 billion), i.e. through the sale of portfolio investment assets its debt obligations in other investment (such as outstanding loans to the rest of the world) were reimbursed.
Luxembourg recorded high levels of both lending and borrowing activities in portfolio investment and other investment, showing relatively high exposure in relation to its GDP in these financial account components. Net transactions in other investment culminated to EUR 117.4 billion in net acquisition of assets (216.6 % of GDP). High levels of activity were also observed in portfolio investment transactions: in 2016 net borrowing of portfolio investment of EUR 120.5 billion resulted from higher net incurrence of portfolio investment liabilities (EUR 185.9 billion) and lower net acquisitions of portfolio investment assets (EUR 65.4 billion). These high levels of issuing activity in Luxembourg are sustained by the domestic mutual fund industry with considerable spill-overs in asset portfolio transactions. However, direct investment activities saw a reduction in net transactions in Luxembourg during 2016, while the Netherlands and Ireland experienced considerable net expansion in this area. Ireland registered EUR 93.0 billion in net acquisition of direct investment assets and EUR 72.9 billion in net incurrence of direct investment liabilities, while the Netherlands increased their direct investment assets by EUR 126.3 billion and direct investment liabilities EUR 72.1 billion in net terms during 2016.
In relation to the previous period transaction levels in other investment were considerably boosted in the EU-28 during 2016. Net acquisitions of other investment assets increased to EUR 240.4 billion and net incurrence of other investment liabilities to EUR 164.7 billion, after last year's significant decline in net transactions. The major contributor to these new dynamics in investment activities were Germany and France as well as the United Kingdom with its earlier mentioned disinvestment in other investment liabilities. As a consequence, the EU-28 remained a net lender in capital (such as loans) to the rest of the world in 2016 (net lending equivalent to 0.5 % of GDP).
As concerns transactions in financial derivatives and employee stock options, the EU-28 was also a net lender in 2016 (EUR 30.2 billion), although this only amounted to 0.2 % of its GDP. Most prominently Germany, Luxembourg and the United Kingdom recorded the highest surpluses, with significant exposure in Luxembourg relative to its GDP (14.4 %). On the contrary, the Netherlands were the most prominent net borrower with its net deficit of EUR 16.3 billion.
Among EFTA countries, unsurprisingly Switzerland showed the most significant exposure to financial transactions. Switzerland, Norway and to a lesser extent Iceland were net lenders in 2016 (Switzerland EUR 71.1 billion, Norway EUR 28.9 billion), with Switzerland recording dynamic activity with respect to direct investment during the year; net acquisition of direct investment assets were EUR 36.1 billion, while direct investment liabilities experienced net redemptions of EUR 15.9 billion. On the other hand, Iceland reported disinvestment in other investment with deficits in both the net acquisition of assets (25.6 % of GDP) and the net incurrence of liabilities (18.4 % of GDP) after previous year's surpluses.
Data sources and availability
The main methodological reference used for the production of balance of payment statistics is the sixth balance of payments manual (BPM6) of the International Monetary Fund (IMF). 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 (asset–liability principle).
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. New data requirements according to the BPM6 manual are included in Commission Regulation no 555/2012 of 22 June 2012 and Commission Regulation no 1013/2016 of 8 June 2016 as an amendment to the above.
In April 2017, the first provisional data for the 4th quarter of 2016 became available, from which the first estimate of the annual results for 2016 have been produced.
The current account of the balance of payments provides information not only on international trade in goods (traditionally the largest category), but also on international transactions in services, primary and secondary income. For all these transactions, the balance of payments registers the value of credits (exports) and debits (imports). A positive balance — a current account surplus (which applied to the EU-28 in 2015 and 2016) — shows that an economy is earning more from its international export transactions than spending abroad from import transactions with other economies, and is therefore a net creditor (net exporter) 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 BPM6, as follows.
- International trade in goods covers general merchandise, net exports of goods under merchanting and non-monetary gold. Exports and imports of goods are recorded on a so-called free-on-board (FOB) valuation — in other words, at market value at the customs frontiers of exporting economies, thus including charges for insurance and transport services up to the frontier of the exporting economy. As a consequence for imports an FOB adjustment is required in order to deduct the value of freight and insurance premiums incurred for the transport up to the border of the importing economy.
- International trade in services consists of the following items: manufacturing services performed on physical inputs owned by others (goods for processing), maintenance and repair services, transport services performed by EU residents for non-EU residents, or vice versa, involving the carriage of passengers, the movement of goods, and auxiliary services, such as cargo handling charges, packing and repackaging, towing not included in freight services, pilotage and navigational aid for carriers, air traffic control, salvage operations, agents’ fees, and so on; travel, which includes primarily the goods and services EU travellers acquire from non-EU residents, or vice versa; and other services, which include construction services, insurance and pension services, financial services, charges for the use of intellectual property not included elsewhere, telecommunications, computer and information services, other business services (which comprise research and development services, professional and management consulting services, technical and other trade-related services, personal, cultural and recreational services, and government services not included elsewhere).
- Primary income covers basically three types of transactions: compensation of employees paid to non-resident workers or received from non-resident employers, investment income from direct, portfolio, other investment and reserve assets, and other primary income (taxes on production and on imports, subsidies and rent). All investment income components cover income on equity and investment fund shares (divided between distributed and accrued income) and interest from investment in debt securities, deposits or loans, and investment withdrawals from income of quasi-corporations.
- Secondary income includes general government current transfers, for example payments of current taxes on income and wealth, social contributions and benefits, transfers related to international cooperation, and current transfers related to financial and non-financial corporations, households, or non-profit organisations.
The capital account of the balance of payments provides information on the acquisition of non-financial assets by residents in the rest of the world, or by non-residents in the compiling economy, for example investment in real estate. It also includes capital transfers by general government and financial, non-financial corporations, households or non-profit organisations (also specifically covering debt forgiveness).
The financial account of the balance of payments covers all transactions associated with changes of ownership in foreign financial assets and liabilities of an economy. The financial account is broken down, according to the BPM6, into five main components: direct investment, portfolio investment, financial derivatives, other investment, and reserve assets. All components are now recorded according to the asset–liability principle, which supports the full implementation of the balance sheet approach in the financial account. In this regard, net values are recorded and have to be interpreted by keeping the underlying gross transactions in mind — net acquisition of assets is based on the acquisition of new assets minus the sale of assets during the observed period, while net incurrence of liabilities consists of the issue of new liabilities minus redemptions of outstanding liabilities. The resulting balance of net assets minus net liabilities is interpreted as net lending to the rest of the world when positive, or net borrowing when negative.
Direct investment implies that a resident direct investor makes an investment that gives control or a significant degree of influence on the management of an enterprise in another economy. Within this classification FDI in equity/investment fund shares (plus reinvestment of earnings where applicable) and in debt securities are distinguished. A breakdown is required for transactions by direct investor in direct investment enterprises, reverse investments and international transactions between fellow enterprises with the ultimate controlling parent being either resident or non-resident. More aspects are covered in a dedicated article on foreign direct investment.
Portfolio investment records the transactions in negotiable financial 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 (other than reserves) are financial instruments that are linked to another 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. They are disseminated as net value of assets and liabilities only.
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) and in principal covers four types of instruments — currency and deposits (in general, the most significant item), trade credits/advances, loans, and 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, and to calibrate the implied macroeconomic risks for the economy. 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 when the crisis unfolded; for example, if internationally comparable information about financial transactions and exposure in specific assets and liabilities had been available earlier.
The European Commission launched new policy proposals in this domain in the aftermath of the financial and economic crisis — aiming to establish legislation that was designed to stimulate the economic recovery (such as the Proposal for a Regulation on the European Fund for Strategic Investments (COM(2015) 10) and to launch regular initiatives to calibrate macroeconomic risks in the EU Member States (such as the Macroeconomic imbalance procedure). Further details on the European Commission’s initiatives are available from the website of the European Commission’s Directorate-General for Economic and Financial Affairs, where more detailed information may be found on a range of recent priorities, in particular, an Growth and Investment and the The European semester.
- Balance of Payments and International Investment Position Manual (BPM6)
- Balance of payment statistics - background
- Balance of payments statistics - quarterly data
- Archive:Foreign affiliates statistics - FATS
- International trade in services
- International trade, investment and employment as indicators of economic globalisation
- Personal remittances statistics
- The EU in the world - economy and finance
Further Eurostat information
- EU28 current account surplus €17.8 bn — News Release 17/02/2017
- Euro area international trade in goods surplus €17.8 bn — News Release 19/04/2017
- Consistency between national accounts and balance of payments statistics — Statistical Working Papers 25/02/2016
- Quality report on balance of payments, international trade in services and foreign direct investments — 2017 edition — Statistical Reports 14/03/2017
- Balance of payments, see:
- Balance of payments - international transactions (BPM6) (bop_6)
Methodology / Metadata
- User guide on European statistics on international trade in goods — 2015 edition Publication, December 2015
- Compilers guide on European statistics on international trade in goods — 2015 edition Publication, October 2015
Source data for tables and figures (MS Excel)
- International Monetary Fund — Balance of Payments and International Investment Position Manual — 6th edition, 2009
- International Monetary Fund — BPM6 Compilation Guide, 2014
- Main changes in the Sixth Edition of the IMF's Balance of Payments and International Investment Position Manual