Published on July 18, 2007

First quarter of 2007: Euro area balance of payments (geographical breakdown) and international investment position (at 31 March 2007)

The current account of the euro area balance of payments (b.o.p.) recorded a deficit of EUR 2.4 billion in the first quarter of 2007. From a geographical perspective, deficits were recorded with the group of "other countries" (i.e. non G-10 countries outside the European Union), the EU institutions and Japan. By contrast, there were surpluses with the United Kingdom, the countries that joined the European Union in 2004 and 2007, and the United States. In the financial account, there were net outflows in direct investment. These were mainly directed towards the group of "other countries" and Switzerland. In portfolio investment, euro area residents made net purchases of foreign securities, predominantly debt instruments. These were mainly issued in the United States, offshore financial centres, the group of "other countries" and the United Kingdom.

At the end of the first quarter of 2007, the international investment position (i.i.p.) of the euro area showed net liabilities of EUR 1,073 billion vis-à-vis the rest of the world (around 12.2% of euro area GDP). This represented an increase of about EUR 14 billion in comparison with the end of the fourth quarter of 2006, mainly as a result of net valuation changes in stocks of foreign assets and liabilities.

Geographical breakdown of the euro area balance of payments for the first quarter of 2007

Current and capital accounts
The current account of the euro area b.o.p. recorded a deficit of EUR 2.4 billion in the first quarter of 2007. This was the result of a deficit in current transfers (EUR 21.0 billion) that was mostly offset by surpluses in goods (EUR 7.6 billion), services (EUR 5.6 billion) and income (EUR 5.4 billion). The capital account recorded a surplus of EUR 5.2 billion, predominantly reflecting a surplus with the EU institutions.

The largest surpluses in goods were with the United Kingdom (EUR 17.6 billion), the United States (EUR 13.9 billion) and the countries that joined the European Union in 2004 and 2007 (EUR 11.2 billion). By contrast, deficits were recorded vis-à-vis "other countries" (EUR 36.9 billion) and Japan (EUR 5.3 billion).

The euro area services surplus was mainly accounted for by surpluses with the United Kingdom (EUR 3.7 billion), Switzerland (EUR 2.1 billion) and the EU institutions (EUR 1.5 billion). The surpluses were partly offset by a deficit with the United States (EUR 3.7 billion).

The euro area income surplus reflected surpluses with "other countries" (EUR 6.8 billion), the United Kingdom (EUR 4.7 billion) and the countries that joined the European Union in 2004 and 2007 (EUR 3.2 billion). By contrast, deficits were recorded with Switzerland (EUR 5.6 billion) and Japan (EUR 4.1 billion).

The deficit for current transfers was predominantly with EU institutions (EUR 11.0 billion) and the "other countries" (EUR 10.5 billion).

The four-quarter cumulated current account of the euro area up to the first quarter of 2007 showed a surplus of EUR 2.4 billion (less than 0.1% of GDP), compared with a deficit of EUR 25.6 billion a year earlier. This development was mainly due to a shift in the income account from a deficit (EUR 16.2 billion) to a surplus (EUR 2.5 billion) and to an increase in the goods surplus (from EUR 28.5 billion to EUR 39.7 billion). The shift in the income account was mainly due to a decline in the income deficit with the United States and an increase in the income surplus with the United Kingdom. The increase in the goods surplus was mainly accounted for by the increases in the surpluses with the countries that joined the European Union in 2004 and 2007 and the United Kingdom.

Financial account
In the b.o.p. financial account, combined direct and portfolio investment recorded net inflows of EUR 98 billion in the first quarter of 2007. This reflected net inflows in portfolio investment (EUR 122 billion). By contrast, there were net outflows in direct investment (EUR 24 billion).

From a geographical perspective, the net direct investment outflows stemmed mainly from outflows to "other countries" (EUR 20 billion) and Switzerland (EUR 11 billion). The euro area recorded net inflows in direct investment mainly from offshore financial centres (EUR 10 billion).

In portfolio investment, net purchases of foreign securities by euro area investors (EUR 145 billion) comprised predominantly debt instruments issued in the United States (EUR 44 billion), offshore financial centres (EUR 29 billion), "other countries" (EUR 23 billion) and the United Kingdom (EUR 19 billion), as well as equity issued in the United States (EUR 14 billion) and offshore financial centres (EUR 13 billion).

Other investment recorded net outflows of EUR 91 billion. These resulted predominantly from net outflows to the United Kingdom (EUR 116 billion).

International investment position at the end of the first quarter of 2007

At the end of the first quarter of 2007, the i.i.p. of the euro area recorded net liabilities of EUR 1,073 billion vis-à-vis the rest of the world (representing around 12.2% of euro area GDP). This amounted to an increase of EUR 14 billion in comparison with the revised data for the end of the fourth quarter of 2006. The increase was caused mainly by "other changes" (primarily revaluations on account of exchange rate and asset price changes).

The change in the net i.i.p. largely resulted from an increase in the net liability position in portfolio investment (from EUR 1,510 billion to EUR 1,594 billion), which was partly offset by a decrease in the net liability position in other investment (from EUR 246 billion to EUR 186 billion).

More information is available in the "Statistics" section of the ECB’s website.