Euro area quarterly balance of payments and international investment position (second quarter of 2017)

• The current account of the euro area showed a surplus of €330.8 billion (3.0% of euro area GDP) in the four quarters to the second quarter of 2017.^[1]
• At the end of the second quarter of 2017 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 €62.9 billion in the second quarter of 2017, compared with €89.8 billion in the same quarter of 2016 (see Table 1). The decrease in the current account surplus was due to a decrease in the surplus for goods (from €108.0 billion to €88.2 billion) and an increase in the deficit for secondary income (from €22.8 billion to €36.5 billion) and for primary income (from €5.5 billion to €8.4 billion). This was partly offset by an increase in the surplus for services (from €10.1 billion to €19.6 billion).

The increase in the surplus for services resulted mainly from an improvement in the deficit for other business services (from €13.4 billion to €10.3 billion) and increases in the surpluses for telecommunication, computer and information services (from €15.8 billion to €18.4 billion), travel (from €9.2 billion to €11.2 billion) and transport (from €2.0 billion to €3.5 billion).

The increase in the primary income deficit resulted primarily from a decrease in the investment income surplus for direct investment (from €37.1 billion to €35.2 billion). In portfolio investment income the increase in the deficits for dividends and for income on investment fund shares were almost offset by an increase in the surplus for interest.

In the four quarters to the second quarter of 2017 the current account of the euro area showed a surplus of €330.8 billion (3.0% of euro area GDP), compared with one of €369.7 billion (3.5% of euro area GDP) a year earlier. This decline resulted from a decrease in the surpluses for goods (from €379.6 billion to €347.9 billion) and services (from €53.2 billion to €48.7 billion) and an increase in the deficit for secondary income (from €124.5 billion to €145 billion). These developments were partly offset by an increase in the surplus for primary income (from €61.3 billion to €79.2 billion).

The geographical breakdown

The decrease in the surplus for the euro area goods account in the four quarters to the second quarter of 2017 compared with one year earlier resulted mainly from a decline in the surpluses vis-à-vis “other countries” (from €58.8 billion to €19.5 billion) and the United Kingdom (from €130.6 billion to €120.5 billion), which were partly offset by a decrease in the deficit vis-à-vis China (from €90.5 billion to €75.1 billion).

The decrease in the surplus for services resulted mainly from a decrease in the surplus vis-à-vis Switzerland (from €26.2 billion to €6.6 billion).

In the four quarters to the second quarter of 2017 non-euro area EU Member States accounted for around 30% of all euro area imports and exports of goods, 11% of which were vis-à-vis the United Kingdom. Compared with one year earlier, the euro area’s main partners remained the United States for exports and China for imports (see Chart 2). As regards euro area trade in services, the United Kingdom remained 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 the second quarter of 2017 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 a deterioration of around €45 billion compared with the first quarter of 2017 (see Table 3).

This change resulted from lower net assets for direct investment (€2,047 billion, down from €2,146 billion) and lower reserve assets (€683 billion, down from €727 billion), and to a lesser extent higher net liabilities for other investment (€806 billion, up from €789 billion). These movements were partly offset by lower net liabilities for portfolio investment (€2,505 billion, down from €2,606 billion) and for financial derivatives (€49 billion, down from €63 billion).

The deterioration in the net international investment position of the euro area in the second quarter of 2017 can be explained mainly by net negative exchange rate changes recorded for all asset and liability components (see Chart 3). For direct investment assets and liabilities, amounts outstanding declined despite the net investments, due mainly to negative exchange rate changes as well as negative price revaluations and other changes in volume. In portfolio investment, assets and liabilities decreased despite net investments, due to negative exchange rate developments. On the assets side the large negative effect of the exchange rate changes was partially compensated for by positive price revaluations, while the negative development of the prices of the euro area issues reinforced the negative exchange rate changes on the liabilities side.

At the end of the second quarter of 2017 the gross external debt of the euro area amounted to €13.9 trillion (approximately 127% of euro area GDP), which represents a decrease of €354 billion compared with the previous quarter. The net external debt also decreased (by approximately €9 billion) owing to a lower decrease in external assets, mostly for debt securities.

The geographical breakdown

At the end of the second quarter of 2017 the stock of euro area direct investment abroad (assets) was €10.8 trillion, 27% 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 €8.7 trillion, with 29% coming from residents of the United States and 22% from offshore financial centres.

As regards portfolio investment, euro area holdings of foreign securities amounted to €8.2 trillion, largely reflecting holdings of securities issued by residents of the United States (which accounted for 35% of the total), as well as by residents of the United Kingdom (16%). Non-residents’ holdings of securities issued by euro area residents stood at €10.7 trillion.

As regards other investment, euro area residents’ claims on non-residents amounted to €5.0 trillion, 34% vis-à-vis residents of the United Kingdom and 19% vis-à-vis residents of the United States. Euro area other investment liabilities amounted to €5.8 trillion, with residents of the United Kingdom accounting for 33% of the total and residents of the United States for 15%.

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 2014 to the first quarter of 2017, this press release incorporates revisions to all periods back to the first quarter of 2008 to accommodate improved national data.

Additional information

Time series data Methodological information Next press releases:

• Monthly balance of payments: 20 October 2017 (reference data up to August 2017).
• Quarterly balance of payments and international investment position: 11 January 2018 (reference data up to the third 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

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