Current account balance of the euro area
Over the last four quarters, the current account balance of the euro area has shown a record surplus of close to €350 billion – that is €50 billion or 17% more than the same period a year ago (€297 billion) and it shows a continuous positive trend in the euro area current account balance (see graph 1).
20 October 2016
The current account of the euro area is obtained by adding the total value of (i) international trade in goods and services, (ii) primary income and (iii) secondary income. All these accounts had a positive balance, with the exception of secondary income, which showed a deficit of €119.9 billion in the last four quarters. This has then lowered the current account balance.
Developments in the current accounts of the euro area countries vary, though significant improvements in the current account balance have been recorded for Greece, Ireland, Italy, Portugal and Spain. These Member States had a negative balance during the financial crisis, but have been in surplus since the end of 2015. As a percentage of GDP, we see that Ireland, Germany, the Netherlands and Slovenia have the largest ratios, of close to 11%, 9%, 8% and 7% respectively, and that only five euro area countries have negative current account balance ratios of a magnitude of less than 3% (as at the second quarter 2016, see graph 2).
The regular quarterly “balance of payment” press releases show that the increases in the euro area goods account balance have resulted mainly from improvements in the trade balance vis-à-vis the United Kingdom and the United States, whereas there is a slightly higher deficit vis-à-vis China.
Quality and consistency improvements have been achieved with the balance of payments statistics, reflecting changes in our economies. New methodological enhancements have been implemented, as reflected in the international statistics standards, such as the IMF’s Balance of Payments Manual, Sixth Edition (BPM6).
For example, the criterion of economic ownership has been given added significance in the recording of imports and exports of goods, and has had a considerable impact. Imports and exports of goods are now only registered when a change in the economic ownership of goods occurs, regardless of whether goods are physically moved. Large intra-company activities of multinationals may have a significant impact on the recording in the balance of payments statistics due to this enhancement.
The balance of payments records and summarises all economic transactions between the residents of a country or an economic region (euro area) and non-residents (or those resident in the rest of the world), during a specific period of time (typically a month, a quarter or a year).
The balance of payments consists of the current account, the capital account and the financial account.
The different accounts within the balance of payments are distinguished by the nature of the economic resource (e.g. goods, services, income or financial assets) provided and received. The sum of the balances of the current and capital accounts represents the net lending (surplus) or net borrowing (deficit).
The financial account shows net acquisitions and disposals of financial assets and liabilities between residents and non-residents. The net balance of the financial account is conceptually equal to the net lending or net borrowing derived from the current and capital accounts.
The structure of the balance of payments
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Current account |
Goods |
General merchandise, net exports of goods under merchanting and non-monetary gold. |
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Services |
Manufacturing services, repair services, transport, travel, construction, insurance and pension services, financial services, charges for the use of intellectual property not included elsewhere (n.i.e.), telecommunications services, computer services and information services, other business services, personal, cultural and recreational services, government goods and services n.i.e. |
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Primary income |
Compensation of employees, investment income and taxes on production and imports, and subsidies on products and production. |
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Secondary income |
Current transfers (income distribution) in cash or in kind between the economies (residents and non-residents), e.g. income tax, social contributions and benefits, personal remittances, etc. |
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Capital account |
A balance of payments component reflecting acquisitions/disposals of non-produced non-financial assets and capital transfers between residents and the rest of the world (non-residents). |
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Financial account |
Direct investment |
Investment by an investor (direct investor) made directly or indirectly (through subsidiaries or associated companies) to acquire a lasting interest (corresponding to at least 10% ownership of ordinary shares or voting rights) in an enterprise (direct investment enterprise). The components of direct investment are equity and debt instruments. Direct investment seeks to establish a long-term relationship between a direct investor and a direct investment enterprise. A direct investor can be either a natural or legal person. |
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Portfolio investment |
Investments in securities (listed shares, unlisted shares and investment fund shares or units and debt securities) that are not of a direct investment nature. In other words, portfolio investment is made without attempting to directly influence the management of the enterprise. |
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Financial derivative |
Financial instruments linked to a particular financial instrument, indicator or commodity, through which specific financial risks can be traded in financial markets in their own right. |
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Other investment |
Financial investment other than that included in direct investment, portfolio investment, financial derivatives and reserve assets. It comprises mostly investments in loans and deposits. |
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Reserve assets |
External assets denominated in foreign currency that are readily available to, and controlled by, monetary authorities. |
Credit (exports) and debit (imports) transactions on the current account or capital account are recorded with a positive sign (+), whereas net transactions are calculated by subtracting debit (imports) from credit (exports).
In the financial account, an increase in assets and liabilities is recorded with a positive sign (+), while a respective decrease is indicated with a negative sign (–). Net components are calculated by subtracting liabilities from assets.
The balance of payments of the euro area and its Member States adhere to the same concepts, hence methodology and calculation methods across all 19 euro area countries are highly comparable. Balance of payments is produced in accordance with the guidelines of the IMF’s Balance of Payments and International Investment Position Manual (Sixth Edition).
Find out more about euro area balance of payments statistics on the ECB’s websites:
Balance of payments and international investment position
Comparing euro area and national current account statistics
Balance of Payments and International Investment Position Manual