Euro area quarterly balance of payments and international investment position (fourth quarter of 2016)

• The current account of the euro area showed a surplus of €359.4 billion (3.3% of euro area GDP) in 2016.
• At the end of 2016 the international investment position of the euro area recorded net liabilities of €0.6 trillion (approximately 6% of euro area GDP).

Current account

The current account of the euro area showed a surplus of €98.3 billion in the last quarter of 2016, compared with €109.0 billion in the same quarter of 2015 (see Table 1). The decrease in the current account surplus was due to a decrease in the surplus for goods (from €97.1 billion to €94.6 billion), a decrease in the balance for services (from a surplus of €15.5 billion to a deficit of €6.0 billion) and an increase in the deficit for secondary income (from €30.0 billion to €34.5 billion). This was partly offset by an increase in the surplus for primary income (from €26.4 billion to €44.1 billion).

The change in the sign of the balance for services resulted mainly from a deterioration in the deficit for other business services (an increase from €3.2 billion to €27.0 billion).

The increase in the primary income surplus resulted primarily from an increase in the investment income surplus for direct investment (from €21.5 billion to €30.4 billion).

In 2016 the current account of the euro area showed a surplus of €359.4 billion (3.3% of euro area GDP), compared with one of €336.4 billion (3.2% of euro area GDP) a year earlier. This rise resulted from an increase in the surpluses for goods (from €350.1 billion to €375.1 billion) and primary income (from €50.2 billion to €73.1 billion). These developments were partly offset by a decrease in the surplus for services (from €69.9 billion to €48.1 billion) and an increase in the deficit for secondary income (from €133.8 billion to €136.9 billion).

The geographical breakdown

The increase in the surplus for the euro area goods account in 2016 resulted mainly from improvements in the surpluses vis-à-vis “other countries” (from €46.3 billion to €57.9 billion), the “offshore financial centres” (from €45.5 billion to €49.6 billion) and, to a lesser extent, the United States (from €117.2 billion to €120.4 billion), and a reduction in the deficit for the goods account vis-à-vis China (from €92.6 billion to €76.6 billion). This was partly offset by decreases in the surpluses vis-à-vis the United Kingdom (from €126.3 billion to €124.8 billion) and “other EU countries” (from €53.9 billion to €48.7 billion).

The decrease in the surplus for services resulted mainly from an increase in the deficit vis-à-vis the United States (from €19.9 billion to €26.1 billion) and a decrease in the surplus vis-à-vis Switzerland (from €31.1 billion to €6.8 billion). This was partly offset by an increase in the surplus vis-à-vis “other countries” (from €37.4 billion to €44.6 billion).

In 2016 non-euro area EU Member States (excluding the United Kingdom) remained the euro area’s main partners for trade in goods — accounting for around 20% of all euro area imports and exports — followed by the United Kingdom for exports and China for imports (see Chart 2). As regards euro area trade in services, the United Kingdom was the largest recipient of exports (accounting for 19% of the total) and the United States the largest provider, accounting for 21% of the total euro area imports of services.

International investment position

At the end of 2016 the international investment position of the euro area recorded net liabilities of €0.6 trillion vis-à-vis the rest of the world (approximately 6% of euro area GDP; see Chart 1). This represented an improvement of around €130 billion compared with the third quarter of 2016 (see Table 3).

This change resulted from a higher net asset position for direct investment (€1,840 billion, up from €1,727 billion) and lower net liability positions for portfolio investment (€2,401 billion, down from €2,439 billion) and financial derivatives (€55 billion, down from €62 billion). These movements were partly offset by a higher net liability position for other investment (€721 billion, up from €710 billion) and a decrease in reserve assets (€708 billion, down from €727 billion).

The improvement in the net international investment position of the euro area in the last quarter of 2016 can be explained by net positive revaluations – due to exchange rate and asset price changes – and transactions. These developments were partially offset by negative other volume changes, mainly related to reclassifications and changes in data coverage (see Chart 3). Positive revaluations due to exchange rate changes have been recorded for all asset and liability components. In direct investment assets and liabilities, the net investment and positive revaluations were only partially offset by negative other volume changes. The increases in portfolio investment assets and liabilities resulted primarily from positive exchange rate and prices developments, which were reinforced by net purchases on the asset side and partially offset by net sales/amortisations on the liability side.

At the end of 2016 the gross external debt of the euro area amounted to €13.6 trillion (approximately 126% of euro area GDP), which represents a decrease of around €20 billion compared with the previous quarter. The net external debt also decreased (by approximately €40 billion) owing to an additional increase in external assets in debt instruments.

The geographical breakdown

At the end of 2016 the stock of euro area direct investment abroad (assets) was €10.2 trillion, 28% of which was invested in the United States and 20% in the United Kingdom (see Table 4). The stock of foreign direct investment in the euro area (liabilities) was €8.4 trillion, with 29% coming from residents in the United States and 21% from “offshore financial centres”.

As regards portfolio investment, euro area holdings of foreign securities amounted to €7.9 trillion at the end of 2016, largely reflecting holdings of securities issued by residents in the United States (which accounted for 37% of the total), as well as by residents in the United Kingdom (15%). Non-residents’ holdings of securities issued by euro area residents stood at €10.3 trillion at the end of 2016.

As regards other investment, euro area residents’ claims on non-residents amounted to €4.8 trillion at the end of 2016, with 31% vis-à-vis residents in the United Kingdom and 18% vis-à-vis residents in the United States. Euro area other investment liabilities amounted to €5.5 trillion, with residents in the United Kingdom accounting for 32% of the total and residents in the United States for 14%.

Data revisions

In addition to the regular revisions to balance of payments (b.o.p.) and international investment position (i.i.p.) data for the period from the first quarter of 2013 to the third quarter of 2016, this press release incorporates:

• revisions to all periods back to the first quarter of 2008 to accommodate improved national data;
• revisions arising from the introduction of an enhanced method to estimate holdings of euro currency by residents outside the euro area. The new method is described in more detail in a dedicated methodological note.
• revisions arising from an enhanced euro area compilation method for other sectors, i.e. households, non-financial corporations and financial corporations other than monetary financial institutions (MFIs). This enhanced compilation method reduced the euro area errors and omissions for all reference periods from 2004 onwards. The enhanced compilation method is described in more detail in a dedicated methodological note.

This press release is also the first to include complete euro area b.o.p. and i.i.p. data back to the first quarter of 1999 following the BPM6 methodology. New euro area b.o.p. financial and capital accounts and i.i.p. data back to the first quarter of 1999 have been estimated, complementing the previously available current account back data. The basic principles and methodology used in the estimation process are described in more detail in a dedicated explanatory note.

Additional information

Time series data: ECB’s Statistical Data Warehouse (SDW).

Methodological information: Balance of payments and international investment position section.

Next press releases:

• Monthly balance of payments: 21 April 2017 (reference data up to February 2017).
• Quarterly balance of payments and international investment position: 5 July 2017 (reference data up to the first quarter of 2017).

Annexes

• Table 1: Current account of the euro area
• Table 2: Current and capital account of the euro area – geographical breakdown
• Table 3: International investment position of the euro area
• Table 4: International investment position of the euro area – geographical breakdown

For media queries, please contact Rocío González, Tel.: +49 69 1344 6451.