Balance of payment statistics



Data extracted in May 2020.

Planned article update: May 2021.

Highlights
The EU-27 current account surplus was €385 billion in 2019 corresponding to 2.7 % of GDP.
In 2019, the EU-27 current account surplus was €155 billion with the United States and the deficit €87 billion with China.
Around three fifths of EU-27 Member States' international trade in goods and half of EU-27 Member States' international trade in services was with other Member States in 2019.

Current account balance, 2019

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 determines 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. Articles on foreign direct investment (in chapter 4) provide 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.

Full article

Current account

The current account of the EU-27 showed a surplus of EUR 385.5 billion in 2019 (see Figure 1), corresponding to 2.8 % of gross domestic product (GDP). By comparison, in 2018 the current account surplus was EUR 406.2 billion. The latest developments for the EU-27’s current account balance follows the trajectory of the last three years. While the current account deficit peaked in 2008 at 1.4 % of GDP, it turned into a surplus one year later and grew steadily until it reached its absolute and relative maximum value in 2016 of 3.3 % of GDP (EUR 417.2 billion). Since then, it has been slowly decreasing, amounting to 2.8 % of GDP in 2019. The current account surplus of the EU-27 for 2019 was based on a firm surplus in the component account for goods (2.1 % of GDP). While services account (0.7 % of GDP) and primary income account (0.3 % of GDP) further contributed to the positive balance, secondary income account (-0.4 % of GDP) recorded a deficit — see Figure 3. The capital account also recorded a slightly negative balance (-0.3 % of GDP).

Figure 1: Current account transactions, EU-27, 2008-19
(EUR billion)
Source: Eurostat (bop_eu6_q)

Among the partner countries and regions shown in Figure 2, the EU-27’s current account deficit was largest with China, standing at EUR 87.4 billion in 2019, followed by offshore financial centres[1] (EUR 52.1 billion) and Russia (EUR 24.1 billion). On the other hand, the highest current account surpluses were recorded with the United States (EUR 155.4 billion), Switzerland (EUR 76.5 billion) and the United Kingdom (EUR 71.4 billion). Surpluses were also recorded with Canada, Brazil and Hong Kong, and to a minor extent with India and Japan.

Figure 2: Current account balance with selected partners, EU-27, 2019
(EUR billion)
Source: Eurostat (bop_eu6_q)


There were 12 EU Member States that reported current account deficits in 2019, and 15 that recorded surpluses (see Figure 3 and Table 1). The largest relative deficits measured as a share of GDP were observed in Ireland (9.4 %), Cyprus (6.7 %) and Romania (4.6 %), while the Netherlands and Malta reported the largest surpluses relative to GDP in their current accounts (10.2 % and 9.7 %, respectively), followed by Denmark (7.7 %) and Germany (7.1 %). In absolute terms Germany recorded by far the largest current account surplus (EUR 245.5 billion) and Ireland the largest current account deficit (EUR 32.8 billion).

Figure 3: Main components of the current account balance, 2019
(% of GDP)
Source: Eurostat (bop_gdp6_q)


By taking a closer look at the current account components, it becomes apparent that the EU-27's current account surplus with the rest of the world is firmly built upon positive balances in the goods and services accounts (EUR 295.3 billion and EUR 103.1 billion, respectively) — see Table 1. Similarly, the current account surplus for the euro area (EUR 320.5 billion) was mostly due to a surplus in trade in goods (EUR 322.3 billion), with the surplus in primary account being slightly higher than for services (EUR 80.9 billion and EUR 68.1 billion, respectively) In absolute terms Germany (EUR 221.3 billion), the Netherlands (EUR 69.2 billion) and Italy (EUR 57.1 billion) were the most prominent net exporters in goods to other countries (intra-EU + extra-EU), while more than half of the EU Member States (16 countries) faced negative balances in their goods accounts in 2019. Among those, France was the major net importer of goods (EUR 46.4 billion), followed by Spain (EUR 28.1 billion) and Greece (EUR 22.8 billion). However, with the exception of the Netherlands (surplus in services of EUR 17.9 billion), the same major net exporting economies in goods appear respectively as net importers in services in 2019, and vice versa: while Germany (EUR -20.5 billion) and Italy (EUR -2.0 billion) observed negative balances in their services accounts, Spain was the major net exporter of services (EUR 63.3 billion) to the rest of the world, followed by Poland, Luxembourg, France and Greece (all of them with surpluses in trade in services higher than EUR 20 billion and negative balances in trade in goods).

The United Kingdom showed a significant current account deficit, mainly due to a deficit in trade in goods, partly compensated by a surplus in trade in services. Among EFTA countries, Norway and Switzerland reported significant current account surpluses in 2019 (Switzerland EUR 77.0 billion, Norway EUR 14.3 billion). These were supported by surpluses for goods in both countries (Switzerland EUR 59.0 billion, Norway EUR 12.5 billion), a firm surplus for services (Switzerland EUR 15.7 billion) and a firm influx of net primary income flows (Norway EUR 15.0 billion, Switzerland EUR 12.5 billion).

Table 1: Main components of the current account balance and the capital account balance, 2019
(EUR billion)
Source: Eurostat (bop_eu6_q) and (bop_c6_a)


Altogether 10 Member States recorded surpluses for goods in 2019 (data for Ireland are confidential), while 23 Member States recorded surpluses for services with the rest of the world — see Figure 3. Among those with the largest relative exposure to surpluses in goods were the Netherlands (8.5 % of GDP), Germany (6.4 % of GDP) and Denmark (5.7 % of GDP). Highest relative exposure to surpluses in services were measured for Luxembourg (37.3 % of GDP), Malta (32.4 %), Cyprus (21.3 %) and Croatia (18.6 %). The net importing economies with largest relative exposure in goods were Cyprus (21.5 % of GDP), Croatia (19.1 % of GDP), Greece (12.2 % of GDP) and Malta (12.0 % of GDP), and in services Ireland (21.0 % of GDP, mostly due to transactions in charges for the use of intellectual property and other business services).

Around three fifths of EU Member States' international trade in goods and half of their trade in services were related to trade with other EU partners in 2019 — see Figure 4 (data for Spain, Malta, as well as for Switzerland and Norway are not available). Cross-border trade in goods with EU partners was highest in Luxembourg (80.6 %) and a further 10 countries recorded shares over 70 %. The lowest share was reported by Greece (49.0 %), the corresponding share for Ireland was treated as confidential. Cross-border trade in services with the EU partners was most prominent in Slovenia, Slovakia, Austria and Romania (all above 70 %) and lowest in Ireland (24.0 %). For the United Kingdom, trade with the EU-27 partners accounted for 49.8 % of its trade in goods and 43.1 % of its trade in services.

Figure 4: Intra-EU exposure of trade in goods and services, 2019
(% of rest of the world)
Source: Eurostat (bop_eu6_q) and (bop_c6_a)

Capital account

Traditionally the capital account of the EU-27 records a deficit, with considerable capital transfers to the rest of the world. In 2019, this trend was continued with a capital account deficit of EUR 37.5 billion, equivalent to 0.3 % of GDP — see Table 1. By far the highest capital account deficit was recorded by Ireland (EUR 34.5 billion, 9.9 % of GDP), whereas capital account surpluses approaching 2 % of GDP were reported by Poland, Croatia, Latvia and Hungary, mostly due to the net receipts from the EU institutions.

Financial account

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.

In 2019 the overall net value of the EU-27 financial account was firmly positive (EUR 511.4 billion), as was the net value of the euro area financial account (EUR 278.3 billion). These surpluses related to 3.7 % of GDP (EU-27) and 2.3 % of GDP (EA-19). A total of 18 EU Member States were net lenders to the rest of the world in 2019, showing surpluses in their net financial accounts, with the highest value relative to GDP reported by the Netherlands (10.8 % of GDP). Nine EU Member States appeared to be net borrowers, among those most prominently in regard to its GDP was Ireland (-19.1 % of GDP) — see Figure 5.

Figure 5: Financial account balance, 2019
(% of GDP)
Source: Eurostat (bop_gdp6_q)


In absolute terms, the largest net lender, by far, in the EU-27 was Germany, with net lending of EUR 204.6 billion in 2019 (see Table 2). This contributed considerably to the EU-27 and the euro area's status as net lender to the rest of the world. The German financial surplus was mainly due to net acquisitions of foreign assets during 2019 in direct and portfolio investment (EUR 100.8 billion and EUR 123.7 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-27 in 2019 were Germany, France, Luxembourg, the Netherlands and Ireland.

Table 2: Main components of the financial account balance with the rest of the world, 2019
(EUR billion)
Source: Eurostat (bop_eu6_q) and (bop_c6_a)


On the other hand, Ireland and France appeared as net borrowers from the rest of the world in 2019 with financial account deficits of EUR 66.4 billion and EUR 55.0 billion (19.1 % and 2.3 % of GDP, respectively). The (negative) net financial account of Ireland was particularly determined by its transactions of direct investment with much larger negative net acquisitions of assets (EUR -123.4 billion) than negative net incurrences of liabilities (EUR -69.7 billion). The (negative) net financial account of France was in particular fostered by its net incurrences of portfolio investment liabilities (EUR 139.3 billion), much higher than net acquisitions of portfolio investment assets (EUR 61.4 billion).

Luxembourg recorded high levels of both lending and borrowing activities in direct, portfolio and other investment with a structural shift from direct investment to the other financial account components, resulting in relatively high exposures of transactions in relation to its GDP. While net acquisitions of assets/net incurrences of liabilities in direct investment with the rest of the world significantly fell in 2019 (EUR -361.1 billion in assets and EUR -328.7 billion in liabilities), net transactions in portfolio investment increased by EUR 150.6 billion in assets and EUR 184.9 billion in liabilities. These high levels of activity in portfolio investment is sustained by the domestic mutual fund industry with considerable spill-overs in asset portfolio transactions. In the Netherlands, both direct investment and portfolio investment activities exhibited considerable net increases during 2019. Net acquisitions in portfolio investment assets with the rest of the world grew by EUR 47.2 billion and net acquisitions in direct investment assets by EUR 69.5 billion; at the same time net incurrence of direct investment liabilities rose by EUR 25.2 billion.

Other investment is a component of the EU-27’s financial account that contributed most to its positive net value in 2019. Net acquisitions of other investment assets increased by EUR 173.8 billion, mainly due to increases in France, Ireland, Spain and Luxembourg. Negative net incurrence of other investment liabilities of EUR -119.1 billion was influenced predominantly by decreases in other investment liabilities in Germany and Italy.

For the EU-27, financial derivatives and employee stock options component of financial account was almost in balance, with a net surplus of EUR 8.0 billion (less than 0.1 % of GDP). Ireland and Germany were the most prominent net lenders with corresponding net surpluses of more than EUR 20 billion, followed distantly by Luxembourg with a net surplus of EUR 8.3 billion.

Among EFTA countries, unsurprisingly Switzerland showed the most significant exposure to financial transactions. Switzerland and Norway were net lenders in 2019 (Switzerland EUR 32.0 billion, Norway EUR 9.6 billion). Switzerland’s positive balance in its financial account was underpinned by its (net) direct investment surplus of EUR 29.7 billion. Norway's net lending status in its financial account was supported by surpluses in (net) portfolio investment of EUR 7.0 billion and in (net) direct investment of EUR 4.9 billion. Iceland reported only also a positive balance in its financial account with the rest of the world by EUR 1.5 billion in 2019, fostered by increased net acquisitions of portfolio investment assets and net reductions in direct and other investment liabilities.

Source data for tables and graphs

Data sources

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 (EC) No 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 (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.

In April 2020, the first provisional data for the 4th quarter of 2019 became available, from which the first estimate of the annual results for 2019 have been produced.

Current account

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 applies to the EU-27 since 2009) — 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 situation 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.

Capital account

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).

Financial account

The financial account of the balance of payments covers all transactions associated with changes of ownership in financial assets and liabilities of an economy with the rest of the world. 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 dedicated articles on foreign direct investment (in chapter 4).

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.

Context

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 2007-2008 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 could 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 aiming to stimulate the economic recovery (such as the European Fund for Strategic Investments), 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, for example Growth and Investment and the The European semester.

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Balance of payments - international transactions (BPM6) (bop_6)

Notes

  1. Offshore Financial Centres (OFC) is an aggregate which includes 40 countries. As examples, the aggregate contains European financial centres, such as Liechtenstein, Guernsey, Jersey, the Isle of Man, Andorra, and Gibraltar; Central American OFC such as Panama and Caribbean islands like Bermuda, the Bahamas, the Cayman Islands and Turks and Caicos Islands; and Asian OFC such as Bahrain, Hong Kong, Singapore and Philippines.