International investment position statistics
- Data extracted in January 2018. Most recent data: Further Eurostat information, Main tables and Database. Planned article update: January 2019.
- Author: Robert Obrzut
The international investment position (IIP) is an economy’s financial statement, compiled at a specified date (such as by the end of year or end of quarter), showing the value and composition of its positions in external assets and liabilities with the rest of the world. When external assets exceed liabilities, the net IIP is positive and when liabilities exceed assets it is negative. This article presents data on the (net) IIP of the European Union (EU) and its Member States. Data are compiled according to the Sixth Edition of the IMF's Balance of Payments and International Investment Position Manual (BPM6), the major components of the IIP for the EU-28 were estimated by Eurostat.
- 1 Main statistical findings
- 2 Data sources and availability
- 3 Context
- 4 See also
- 5 Further Eurostat information
- 6 External links
- 7 Notes
Main statistical findings
The EU-28 is a net borrower of financial funds
Eurostat estimations based on official data show the EU-28 as a net debtor towards the rest of the world, owing to higher positions in liabilities than in assets (Table 1). As a consequence the EU-28 is a net borrower of financial funds (as is the euro area).
Without accounting for reserve assets, the net position in the financial account of the EU-28 amounted to EUR -3 286.2 billion in 2016 (EUR -3 465.4 billion in 2015), with portfolio investments most prominently contributing to this with a net position of EUR -5 497.9 billion. This was particularly supported by a prominent (net) exposure to issuances in debt securities and investment fund shares, the latter mainly being raised through financial hubs (among others Luxembourg and Ireland). In comparison, also the euro area and the United States reported a negative net IIP in 2016, amounting to EUR -802.8 billion and EUR -7 710.5 billion respectively, while Japan recorded a positive net IIP of EUR 2 829.1 billion in the same year. In relative terms, the net IIP of the EU-28 measured -22.0% of GDP, while that of the euro area only -7.4% of GDP.
EU-28 is a prominent direct investor abroad
Despite its overall negative net investment position with the rest of the world, the EU-28 is a significant net lender in direct investment to the rest of the world. Based upon Eurostat estimations, net assets in direct investment with outside the EU-28 amounted to EUR 1 912.4 billion in 2016 (EUR 1 806.9 billion in 2015). The positive net IIP resulted from the higher value of EUR 8 569.6 billion in external assets compared to EUR 6 657.2 billion in external liabilities. The Member States with the highest (net) exposure were the Netherlands, France and Germany. By the end of 2016, the Netherlands recorded a net position of EUR 410.3 billion in direct investment vis-à-vis extra EU-28, while France and Germany followed with EUR 342.9 and 340.6 billion respectively. More specifically, the Netherlands recorded an outstanding direct investment net surplus position of EUR 164.4 billion with Brazil, while France and Germany had high (net) exposures abroad in the United States with EUR 174.5 billion and EUR 177.8 billion (Table 2). However, in gross terms Luxembourg and the Netherlands recorded the highest levels of direct investment activity outside the EU-28. While Luxembourg prefers to keep these data confidential, the Netherlands recorded EUR 2 523.0 billion in external assets and EUR 2 112.7 billion in external liabilities in 2016.
EU-28 is a net lender of other investment
The IIP of the EU-28 in the other investment component showed a net position of EUR 229.0 billion in 2016 (EUR 300.0 billion in 2015). Thus, the EU-28 is a net lender to the rest of the world in financial funds related to other investment (Table 3). The major contributors to the positive net assets of the EU-28 in 2016 were the United Kingdom and Germany (EUR 211.7 billion and EUR 151.8 billion with the rest of the world respectively). Outside the EU Germany appeared as prominent net lender to offshore centres (EUR 164.1 billion), while France showed a high net lending position with Japan in 2016 (EUR 95.2 billion) and Ireland with the USA (EUR 44.7 billion).
Germany and the Netherlands are the EU-28's primary creditor nations
IIP data for each Member State can be analysed by examining their (net) exposure in financial assets and liabilities with the rest of the world (including intra-EU exposure). Economies with higher positions in financial assets abroad than financial liabilities (i.e. a positive net IIP) are consequently considered as net lenders or creditors. Germany and the Netherlands appear as the major net lending economies in Europe (Table 4). In 2016 Germany registered a striking surplus position of EUR 1 708.9 billion in its net IIP (increasing from EUR 1 478.0 billion in 2015), and the Netherlands followed with EUR 475.5 billion (EUR 376.9 billion in 2015). Outside the EU-28 Switzerland and Norway reported high net lending positions with EUR 729.0 billion and EUR 697.5 billion in the same year.
The top debtor nations in the EU-28: Spain, Ireland and France
Economies with higher positions in financial liabilities abroad than financial assets (i.e. a negative net IIP) are considered as net borrowers or debtors. The top net borrowing economies in the EU-28 in absolute terms in 2016 were Spain with a negative net IIP of EUR -938.4 billion, Ireland with EUR -485.5 billion and France with EUR -351.0 billion. A similar picture is given by figures on net external debt, which shows the highest volumes of indebtedness in the EU-28 in Spain (EUR 993.4 billion) in 2016. Financial stability analysis is in this context more concerned about the sustainability of long-term negative net IIPs and their size in relation to total economic activity (usually expressed in % of GDP), and in relation to current account balances. Negative net IIPs - if maintained for longer periods - could reveal structural rigidities in local credit markets with the consequence of long-term and accumulating debtor positions towards the rest of the world. However, these values have to be assessed in the context of a multitude of macroeconomic indicators, in order to avoid premature conclusions on macroeconomic imbalances without knowing the full picture. While the net borrowing positions of France assumed only 16 % of its GDP in 2016, several other European countries reported negative net IIPs with the rest of the world close to or more than 100 % of their GDPs. In 2016 this concerned in particular Ireland (176 %), Greece (139 %), Cyprus (128 %) and Portugal (105 %) in the EU-28, as well as Serbia (103 %). Within the framework of a reinforced European economic governance after the financial and economic crisis, the European Commission has developed a set of scoreboard indicators to identify harmful macroeconomic imbalances. The net IIP as a percentage of GDP is one of the indicators included in the Macroeconomic imbalances procedure (MIP) for early warnings and national values are carefully monitored on an annual basis. The indicative threshold applied for benchmarking negative net IIPs is 35 % of GDP.
Data sources and availability
Statistics about the international investment position is based upon positions (or stocks) data which relate to the framework of balance of payments statistics. The main methodological reference is the Sixth Edition of the Balance of Payments and International Investment Position Manual (BPM6) of the International Monetary Fund (IMF). This new set of international standards has been developed, partly in response to significant 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 IIP data to Eurostat is covered by Regulation (EC) No 184/2005 of the European Parliament and of the Council of 12 January 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 (EU No 555/2012 of 22 June 2012 and Commission Regulation (EU No 1013/2016 of 8 June 2016 as an amendment to the above.
Why the IIP of the EU-28 is only an estimate?
The international investment position is an indicator of an economy’s external exposure in financial assets and liabilities to the rest of the world. This contributes most effectively to monetary policy analysis and foreign exchange rate policies. Given that the EU-28 is not a homogeneous currency union (unlike the euro area), such a measure has been treated only with minor attention in the past, and the publication of national IIPs has been deliberately left to Member States which maintain their own national currencies. Since the outbreak of the financial crisis user needs have however somewhat changed, and there have been increasing demands for an IIP of the EU-28 for the purpose of financial stability analysis of the European Union in general, and Member States in particular.
However, the compilation of the IIP for the EU-28 would require a geographical breakdown of positions data far beyond the current legal requirements. Firstly, all Member States would have to generally disseminate their assets and liabilities held outside the European Union (Geo 3, extra EU-28). Secondly, this would require all Member States to send also their positions in reserve assets (as a component of the IIP) vis-à-vis extra-EU28 to Eurostat, which is currently not the case (Geo 3, extra EU-28). The current legal framework of the European Union does not address these additional data requirements sufficiently – data requirements applying to Member States not participating in the Monetary Union are generally less comprehensive, with some improvements for other investment and financial derivatives components to be expected by 2019. The legal requirement for the dissemination of portfolio investment liabilities remains practically without geographical breakdown (Geo 1, rest of the world) , and requires resorting to other data sources, while the dissemination of reserve assets is not covered by the above mentioned regulation. In spite of these difficulties, Eurostat has estimated the main IIP components for the EU-28, based on mirror data from counterpart Member States and geographical details from national and international data sources (IMF).
Interpreting external debt
Two measures in macroeconomic statistics complement IIP statistics – gross and net external debt. Their methodology is covered in the External Debt Statistics - Guide for Compilers and Users (EDS).
Gross external debt represents the total position of an economy in debt liabilities, and comprises the following debt instruments: special drawing rights (SDR) allocations, currency and deposits (including unallocated gold accounts), debt securities at nominal or market value, loans, insurance, pension and standardised guarantee schemes, trade credits and advances, and other accounts payable (EDS, paragraph 2.11). Equity and investment fund shares are excluded from this definition because no payment of principal or interest is required. Likewise the definition excludes financial derivatives and employee stock options.
Eurostat publishes net external debt as positions in debt liabilities minus the respective positions in debt assets. The latter is based on the assumption that for risk-management purposes entities manage their external liabilities and assets in an integrated manner. Consequently, the difference between an economy’s net external debt and net international investment position is the absence of all equity and investment fund shares components, as well as financial derivatives  and gold bullion (EDS, paragraph 7.51), as well as the sign convention.
Eurostat publishes both gross and net external debt, based on quarterly IIP data for all EU-28 Member States and several European countries, while the World Bank publishes annual data on external debt positions for most countries in the world .
The EU is a major player in the global economy not only for international trade in goods and services, but also for financial market operations and direct investment. Statistics on the international investment position provides a complete picture of the EU-28 and its Member States’ external exposure in financial assets and liabilities to the rest of the world. These statistics effectively support financial stability analysis and 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 calibrate the implied macroeconomic risks for the respective economies. 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 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 at establishing a package of actions designed to stimulate economic recovery, such as the Proposal for a Regulation on the European Fund for Strategic Investments (COM/2015/010), and to launch regular initiatives such as the Macroeconomic imbalances procedure to detect macroeconomic risks in EU Member States, and provide advice for addressing them. 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 (DG ECFIN), with a particular interest in recent priorities concerning the European semester.
- Balance of Payments statistics
- Quarterly sector accounts - households
- Quarterly sector accounts - non-financial corporations
- Building the System of National Accounts
Further Eurostat information
- Bureau of Economic Analysis (BEA) - U.S. Net International Investment Position: First Quarter of 2017, Year 2016, and Annual Update, Washington D.C., 20 July 2017
- European Central Bank (ECB), Euro area quarterly balance of payments and international investment position (third quarter of 2017), Frankfurt/Main, 11 January 2018
- European Central Bank (ECB): Who holds what? New Information on Securities Holdings, in: Economic Bulletin, Issue 02/2015, March 2015
- Lavrador, I., Peronaci, R. and Silva, N.: Security‐by‐security data on holdings of securities: the importance for National and Euro Area Accounts, in: Irving Fisher Committee on Central Bank Statistics, IFC Bulletin No. 36, Bank for International Settlements (BIS), Basel, August 2012
- Amann, M., Anacki, M., Buckmann, D. and Lavrador, I.: Securities Holdings Statistics Database (SHSDB): The new ESCB micro database on holdings of securities, ISI 2015 World Statistics Congress, Rio de Janeiro, July 2015
- Zucman, G.: The Missing Wealth of Nations: Are Europe and the U.S. Net Debtors or Net Creditors?, Paris School of Economics, February 2013
- Balance of payments statistics and International investment positions (BPM6) (bop_q6)
- Quarterly sector accounts (ESA 2010) (nasq_10)
- Annual sector accounts (ESA 2010) (nasa_10)
Methodology / Metadata
- Balance of payments statistics and international investment positions (ESMS metadata file — bop_q_esms)
- International Monetary Fund (IMF), Development of International Investment Position Statistics, Washington D.C., August 2002
- International Monetary Fund (IMF), International Investment Position: A Guide to Data Sources, Washington D.C., October 2002
- Interagency Task-Force on Finance Statistics, External Debt Statistics – Guide for Compilers and Users (EDS), International Monetary Fund (IMF), Washington D.C., 2014
- Valdivia-Velarde, Eduardo: Update of the External Debt Guide on Issues Emerging from BPM6, International Monetary Fund (IMF), Washington D.C., April 2009
Source data for tables, figures and maps (MS Excel)
- Regulation (EC) No 184/2005 of the European Parliament and of the Council of 12 January 2005 on Community statistics concerning balance of payments, international trade in services and foreign direct investment.
- Commission Regulation (EU) No 555/2012 of 22 June 2012 amending Regulation (EC) No 184/2005 of the European Parliament and of the Council on Community statistics concerning balance of payments, international trade in services and foreign direct investment, as regards the update of data requirements and definitions.
- Commission Regulation (EU) No 1013/2016 of 8 June 2016 as an amendment to the above
- International Monetary Fund — Balance of Payments and International Investment Position Manual — 6th edition, 2009
- However, considerable doubts have been raised about the negative net IIP. By estimating data gaps in assets held by euro area residents in offshore financial centres, missing in the compilation of national IIPs, the author concludes that the euro area is indeed a net lender to the rest of the world. See: http://www.parisschoolofeconomics.eu/docs/zucman-gabriel/mwn23march.pdf
- Source: European Central Bank (ECB), Bureau of Economic Analysis (BEA), Ministry of Finance Japan. Differences with official figures may occur due to exchange rates applied.
- Consisting of other equity, currency and deposits, loans, insurance, pension and standardised guarantee schemes, trade credit and advances, other accounts receivable/payable, special drawing rights.
- The United Kingdom does not publish a country breakdown of its financial assets and liabilities abroad. Therefore UK figures were estimated from available mirror statistics of the other EU partners
- For the complete list of offshore financial centres, see Balance of Payments Vademecum, Update December 2016, Eurostat, Luxembourg 2017, Appendix 7
- Including all components of the IIP, i.e. direct investment, portfolio investment, other investment, financial derivatives and employee stock options, reserve assets.
- The legal provisions respect traditional information asymmetries of national compilers on non-resident investors holding resident securities. However, recent developments in European securities databases have promisingly improved information on at least European residents' holdings in securities, now available to national compilers in the EU-28.
- The IMF's Coordinated Portfolio Investment Survey (CPIS)
- Net external debt = direct investment liabilities in debt instruments + portfolio investment liabilities in debt securities + other investment liabilities in currency and deposits + other investment liabilities in loans + other investment liabilities in insurance, pension and standardised guarantee schemes + other investment liabilities in trade credit and advances + other investment liabilities in other accounts receivable/payable + other investment liabilities in SDRs - direct investment assets in debt instruments - portfolio investment assets in debt securities - other investment assets in currency and deposits - other investment assets in loans - other investment assets in insurance, pension and standardised guarantee schemes - other investment assets in trade credit and advances - other investment assets in other accounts receivable/payable - reserve assets in monetary gold and unallocated gold accounts - reserve assets in SDRs - reserve assets in the IMF reserve position - reserve assets in currency and deposits - reserve assets in debt securities - reserve assets in other claims. See: Balance of Payments Vademecum (Eurostat).
- EDS suggests additionally an extended measure of net external debt, including net financial derivatives. A comprehensive overview is presented in EDS, Table 7.14
- Net external debt = (debt) liabilities minus (debt) assets