BALANCE OF PAYMENTS. First quarter Balance of payments

Transcription

1 BALANCE OF PAYMENTS DATE: PUBLISHER: Balance of Paymens and Financial Markes (BFM) Lena Finn , lena.finn@scb.se Camilla Bergeling , camilla.bergeling@scb.se Malin Sundeby , malin.sundeby@scb.se Nex quarerly publishing Produced by Saisics Sweden on behalf of he Riksbank. Firs quarer 2008 Balance of paymens The balance of paymens for he firs quarer of 2008 resuled in a surplus in he curren accoun of SEK 81.1 billion, a sligh negaive capial accoun and a surplus of SEK 19 billion in he financial accoun. I was primarily he srong rade in goods in February ha conribued o he surplus in he curren accoun of SEK 81.1 billion. The rade in goods amouned o SEK 39.4 billion for he quarer, and is a resul of high levels of impors and expors of goods. Following he weak expor of goods in December, expors have again begun o increase in he beginning of The financial accoun resuled in a surplus of SEK 19 billion. Ineres for buying Swedish companies has again risen and during he firs quarer many direc invesmen deals were finalised. The larges single acquisiion was made by Nasdaq, which acquired he Swedish sock exchange OMX during he quarer. Share rade once again resuled in a significan ne ouflow during he firs quarer. Foreign invesors made ne sales of Swedish shares while Swedish invesors coninue o purchase shares abroad. During he firs quarer, Swedish invesors made ne purchases of shares abroad for SEK 45.4 billion, a significan increase compared o he previous quarer. 1

2 Curren accoun Curren accoun, ne (see Table A) The balance of paymens for he firs quarer of 2008 shows a surplus of SEK 81.1 billion in he curren accoun. This is an increase of SEK 1.6 billion compared o he corresponding period in 2007, and i is above all a surplus in he rade of goods ha conribues o he increase. The quarer shows a sronger rade of goods compared o he same period in 2007, while rade in services was weakened. Curren ransfers increased during he quarer by SEK 1.6 billion compared o he firs quarer of Trade in goods Trade in goods (see Table A) 60 The rade in goods reached SEK 39.4 billion, an improvemen of SEK 3.3 billion compared o he corresponding period in However, his marks an improvemen of SEK 9.5 billion compared o he previous quarer. This improvemen is above all explained by he high ne rade surplus for February. During he firs quarer, expors of goods amouned o SEK 3.3 billion while impors amouned o SEK 271 billion

3 Trade in services The firs quarer resuled in a weaker rade in services compared o he same period in The rade in services amouned o SEK 23.9 billion, a deerioraion of SEK 1.4 billion. Transporaion generaed a surplus of SEK 5.4 billion while ouris paymens resuled in a defici of SEK 5.3 billion. The expor of ranspor services amouned o SEK 18.4 billion, a decrease of SEK 3.2 billion compared o he previous quarer. Compared o he previous quarer however, his is an increase of SEK 3 billion. Impors amouned o SEK 13 billion, a decrease of 0.6 billion compared o he previous quarer. However, in comparison wih he firs quarer of 2007, impors have increased by 1.6 billion. Trade in services (see Table G) The flow of ravel increased by abou SEK 1 billion compared o he firs quarer of 2007 and amouned o SEK 19.3 billion. A he same ime he ouflow increased by SEK 3.6 billion and amouned o SEK 24.7 billion. This resuled in a ne ouflow of SEK 5.3 billion, comparable o a ne ouflow of SEK 2.7 billion during he firs quarer of Boh expors and impors of oher services decreased during he firs quarer compared wih he fourh quarer of The iem resuled in a surplus of abou SEK 23.9 billion, which is a weak decrease compared o he corresponding quarer in 2007, bu a decrease of SEK 2.3 billion compared o he previous quarer. On he expor side, services such as licences and royalies, merchaning, research and developmen as well as echnical services decreased, while legal services and commission for goods increased. On he impor side, services such as licences and royalies, markeing, research and developmen as well as echnical services decreased. Concerning oher business services, merchaning accouned for SEK 13.6 billion of he combined surplus, a decrease of SEK 2.8 billion compared o he fourh quarer bu a sligh increase compared o he same quarer in This iem consiss of Swedish companies' purchases and sales of goods abroad wihou such goods passing Swedish borders. Merchaning is defined as he rade margin, i.e. he difference beween he purchase price and he sales price. 3

4 Income Income, consising of compensaion of employees and capial income, showed a surplus of SEK 25.8 billion during he firs quarer, which is SEK 2.2 billion lower han he quarer before. The surplus was mosly made up of earnings on capial from direc invesmens ha amouned o SEK 24.5 billion. The salary iem is nearly unchanged compared o he previous quarer. Income (see able H) Direc invesmen income, ne Income on direc invesmen showed a ne inflow of SEK 24.5 billion during he firs quarer of This was a decrease of SEK 2.1 billion compared o he corresponding period he year before. Direc invesmen income, ne (see Table H) Income from direc invesmens abroad amouned o SEK 66.4 billion, while income on corresponding foreign direc invesmen in Sweden oalled SEK 41.9 billion. 5 This iem mainly consiss of profis in direc invesmen companies, and, o a lesser exen, of ineres on loans wihin a direc invesmen relaionship. 4

5 Porfolio invesmen income, ne Porfolio invesmen income, ne(see Table H) 5 Income from porfolio invesmens, consising of ineres and share dividends, resuled in a capial inflow of SEK 2.6 billion ne during he firs quarer of As a resul, ne income on porfolio invesmens wih oher counries increased by SEK 2.1 billion compared o he corresponding period he year before. Dividends on Swedish shares in he firs quarer produced an ouflow of SEK 0.1 billion during he year, while dividends in foreign shares resuled in an inflow of SEK 12.5 billion Ineres coss for Swedish deb securiies amouned o SEK 19.7 billion, while holdings of inernaional bonds and money marke insrumens generaed an income of SEK billion. Oher invesmen income, ne Income on oher invesmen gave rise o a ne ouflow of SEK 0.8 billion during he firs quarer of 2008, which is lower han in previous quarers. Ne ineres has decreased by over 50 percen compared o he same quarer in Compared o he firs quarer of 2007, income from oher invesmen abroad increased from SEK 14.6 billion o SEK 17.4 billion. During he same period, he ouflow of income from oher invesmen income in Sweden increased from SEK 16.6 billion o SEK 18.2 billion. The income values for debs and asses were abou he same in he firs quarer of 2008 as in he firs quarer of A he same ime, ineres raes have gone up. Income from oher invesmen consiss of earnings on loans and bank deposis ec. The larges conribuions o his iem come from Swedish banks' income on heir asses and liabiliies owards counerpars abroad. 5

6 Curren ransfer and capial accoun, ne The ne sum of curren ransfers and he capial accoun gave a defici of SEK 8.8 billion which is an improvemen of SEK 3.1 billion compared o he fourh quarer of 2007, and SEK 4.1 billion compared o he firs quarer of Curren ransfer and capial accoun, ne Transacions linked o he EU generaed a defici of SEK 3.3 billion, an increase of SEK 2.2 billion compared o he firs quarer of Foreign aid amouned o SEK 0.8 billion, nearly unchanged from las year. The iem oher ransfers showed a defici of SEK 3.8 billion, an increase of he defici by SEK 1.6 billion compared o he same period las year. This iem has also increased somewha compared o he previous quarer I is mainly he sub-iem acquisiions/sales of immaerial asses in he capial accoun ha deviaes from he previous quarer and he firs quarer of The ne of acquisiions/sales resuled in a defici of SEK 0.2 billion compared o he same period in 2007 ha resuled in a surplus of SEK 2.3 billion. 6

7 Financial accoun The financial accoun resuled in a surplus of SEK 19 billion for he firs quarer of The iem oher invesmen is he main conribuor o he surplus of a ne inflow of SEK 59.6 billion. Direc invesmens also conribue o he ne inflow wih SEK 5.1 billion. Porfolio invesmens resuled in a ne ouflow of SEK 42.6 billion while rade in financial derivaives resuled in a ne ouflow of SEK 8.9 billion. Financial accoun (see Table J) Swedish invesmen abroad Invesmen in Sweden Direc invesmen During he firs quarer of 2008, direc invesmen resuled in a ne inflow of SEK 5.1 billion. This corresponds o an increase of SEK 41.2 billion compared o he same period las year when he iem resuled in a new ouflow of SEK 36.1 billion. Direc invesmen (see Table J) Swedish invesmens abroad produced an ouflow of SEK 64.4 billion during he quarer while foreign invesmen in Sweden resuled in an inflow of SEK 69.5 billion Swedish invesmen abroad Invesmen in Sweden The ne inflow is largely because a number of foreign acquisiions of Swedish companies were finalised during he quarer, where Nasdaq s acquisiion of he Sockholm sock exchange OMX was he larges deal. This is refleced in he sub-iem equiy capial. This iem showed a ne inflow of SEK 48.8 billion for he firs quarer, which is an increase of SEK 43.9 billion compared o he same quarer in I is imporan o noe ha oal profi, consising of re-invesed profis and reurned dividends, are forecased and may be subjec o revisions. 7

8 Porfolio invesmen Porfolio invesmens abroad generaed a capial ouflow of SEK 42.6 billion in he firs quarer of This can be compared o he same period he year before when porfolio invesmens produced a ne ouflow of SEK billion. Porfolio invesmen (see Table J) Foreign ineres for Swedish deb securiies was considerably less han during he same quarer one year ago. In oal, foreign invesors purchased Swedish deb securiies for a ne value of SEK 55.3 billion, or a decrease of SEK 161 billion. The firs quarer of 2007 generaed an unusually large ne inflow Swedish invesmen abroad Invesmen in Sweden Swedish invesors increased heir holdings in foreign bonds and money marke insrumens by SEK 50.8 billion. Foreign bonds in Swedish kronor and money marke insrumens in foreign currency were he main ne purchase iems. Share rade resuled in a significan ne ouflow of SEK 47.1 billion during he firs quarer. This is an increase of SEK 39 billion ne compared o he same quarer las year. Swedish invesors coninued o make ne purchases of foreign shares and funds for SEK 45.4 billion in he firs quarer. A he same ime foreign invesors made ne sales of Swedish shares for SEK 1.7 billion. 8

9 Financial derivaives Financial derivaives gave rise o unusually large flows which resuled in a ne ouflow of SEK 8.9 billion in he firs quarer. Thus, hree quarers in a row have had relaively large ne ouflows. During he firs quarer of 2007, he value of ne ouflow was SEK 4.4 billion. The flows concerning financial derivaives consis primarily of realised posiive and negaive values of derivaive conracs during he period (inflow and ouflow respecively). Opion premiums ha have been paid for and received are also included in he flows. Financial derivaives (see Table J) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q Swedish invesmen abroad Invesmen in Sweden Oher invesmen Transacions relaed o oher invesmen resuled in a ne ouflow of SEK 59.6 billion during he firs quarer of Oher invesmen (see Table J) Changes in Swedish lending o oher counries, among oher hings, resuled in a ne ouflow of SEK 55.6 billion while he corresponding changes for loans o and deposis in Sweden resuled in a ne inflow of SEK billion The ouflow concerning lending o oher counries is mainly because Swedish banks repor increased lending in foreign currency. Banks also accoun for mos of he inflow; during he period banks have increased long-erm borrowing in foreign currencies and shor-erm borrowing in Swedish kronor. Swedish invesmen abroad Invesmen in Sweden 9

10 Inernaional invesmen posiion, ne (see Table E) Inernaional invesmen posiion, ne 0-0 The inernaional invesmen posiion is compiled wice a year. During 2007, he foreign deb was reduced by half compared o The oal ne deb abroad amouned o SEK 197 billion, which amouns o approximaely 6.5% of he Swedish GDP. Ne asses, in he form of direc invesmens, have been forecased a SEK 348 billion. This corresponds o an increase in asses of SEK 2 billion compared o The ne deb in he form of porfolio invesmens (porfolio shares and deb securiies) amouned o SEK 520 billion, which is a decrease of SEK 60 billion compared o The remaining ne deb, exclusive of direc invesmens and porfolio invesmens, coninued o lessen during las year. This remaining deb was reduced in oal by SEK 30 billion compared o 2006 and amouned o SEK 256 billion by he close of The official compilaion of Sweden's inernaional invesmen posiion was revised o reflec marke value, wih he excepion of direc invesmen, which is repored a book value. A compilaion of Sweden's exernal posiion is published as a complemen, where he marke value of direc invesmen has also been calculaed (Table F). According o his compilaion, Sweden's ne asses abroad for 2007 equalled SEK 437 billion. Those facors of greaes significance for he developmen of he inernaional invesmen posiion include: SEK exchange rae, share prices on he sock marke in Sweden and abroad, and he marke value of direc invesmen companies. I is imporan o noe ha several sub-iems in he inernaional invesmen posiion for June 2007, such as direc invesmen and porfolio shares, are forecass. The figures should herefore be inerpreed wih cauion

11 Wha is he balance of paymens? In a closed economy he level of invesmen is deermined by he oal savings in he economy. This means ha if he savings decline for some reason, invesmens will also decline. In an open economy he relaionship beween savings and invesmen is no as clear, as global financial markes enable inernaional capial o flow easily beween counries. The balance of paymens conains informaion on hese flows. Pu in simple erms, i is a compilaion of a counry's real and financial ransacions wih he res of he world. The balance of paymens can be divided ino: Curren accouns, including regular ransacions in goods and services, reurn on financial asses and debs, and regular ransfers such as EU subsidies and fees. The capial accoun, which covers EU subsidies and foreign aid for real invesmen as well as he purchase and sale of righs, such as paens. The financial accoun, which can be divided ino direc invesmen, porfolio invesmen, financial derivaives, oher invesmen and he foreign currency reserve. The financial accoun shows changes in exernal financial asses and liabiliies. Derivaion of he balance of paymens A counry's gross domesic produc, GDP, is he oal value of he goods and services produced in he counry during a cerain year. Producion is used o saisfy eiher domesic demand in he form of households' consumpion, C, privae invesmen, I, and public expendiure, G, or o be delivered abroad in he form of expors of goods and services, X. Domesic demand can also be saisfied by he impor of goods and services, M. The Naional Income Ideniy shows ha a counry's producion during an individual year is equal o he sum of domesic demand ( C + I + G ) and ne sales of goods and services o he res of he world ( X M ): GDP = C + I + G + X M. 1 (1) By adding ogeher he ne facor incomes, F, i.e. Swedish facor income earned abroad (Swedish wageearners' remuneraion abroad and earnings on foreign capial abroad) minus foreign facor income earned in Sweden (foreign wage-earners' remuneraion in Sweden and earnings on foreign capial in Sweden) i is possible o rewrie (1) in erms of gross naional income, GNI C + I + G + X M + F GNI : 2 =. (2) Rewriing (2) gives: GNI C G = S = I + X M + F, (3) 1 This relaionship is called an ideniy because i mus by definiion be fulfilled in every individual ime period. 2 These facor incomes are ofen called primary incomes. Ne facor incomes consis of wages, capial earnings and curren ransfers. 11

12 where S refers o he oal naional savings in he economy. The naional savings consis of he consolidaed public secor savings, T G, where T is ax income, and households' savings, GNI T C. 3 According o (3): S I = X M + F. (4) The difference beween S and I is ofen called ne exernal invesmen and he difference beween X and M is called he balance of rade. X M + F is he curren accoun balance. Equaion (4) hus shows ha here is a simple connecion beween ne invesmens and he balance of rade. For a given ne facor income, changes in he difference beween S and I will always be followed by corresponding changes in he difference beween X and M. Equaion (4) also shows ha i is no possible in he shor erm o reduce a defici in he balance of rade wihou a he same ime increasing naional savings or reducing domesic invesmen. 4 I is also ineresing o noe ha equaion (4) means ha if households' savings are as grea as domesic invesmen, public secor savings will develop roughly in line wih ne expors over ime. 5 In he same way as naional savings can be divided up ino he consolidaed public secor's savings and households' savings, domesic invesmens can be divided up ino public secor invesmen and privae invesmen. This division indicaes ha if he public secor's invesmen exceeds is savings, and if his is no compleely couneraced by a savings surplus in he privae secor, i mus by definiion be mached by a defici on he curren accoun balance. A growing defici in he curren accoun balance can hus be a sign among many ha he cenral governmen's expendiure is greaer han is income. By combining he naional income ideniy (1) wih he naional budge resricion, i is possible o derive he balance of paymens. According o he budge resricion, he counry's oal expendiure in each ime period is limied by he income in he same period and he counry's possibiliies o borrow. GDP + r A = C + I + G + A + A ). (6) ( 1 where A is he ne exernal asses during period and r A is he ineres earnings on hese asses. The ne asses in urn consis of he capial balance and he financial balance. I is simple o obain he balance of paymens from (1) and (6). X M + F = ( A A ) 1. (7) + The lef side of he balance of paymens (7) is, as menioned earlier, he curren accoun, which consiss of he sum of he balance of rade and ne facor incomes. The erm ( A A + 1) on he righ side shows how he ne exernal asses change over ime. Please noe ha if Swedes make ne purchases of foreign asses, he capial balance and he financial balance will show a ne defici, i.e. A < Equaion (7) hus A 3 This means ha he naional savings are idenical o he sum of he public secor savings and households' savings. 4 Ne facor incomes are assumed o be consan in he shor erm. 5 This relaionship means in acual fac ha he public secor's budge balance will co-vary wih he balance of rade during cerain periods of ime. 12

13 means ha he sum of he curren accoun balance, he capial balance and he financial balance is always idenical o zero. 6 The connecion o he inernaional invesmen posiion As he financial balance measures exernal ne lending, a change in he balance on he curren accoun will - by definiion - always be mached by a similar change in he ne exernal claims. A surplus on he curren accoun is hus mached by an increase in exernal ne claims - privae or public secor. The surplus can also be refleced in an increase in he foreign currency reserve, as hese ransacions are included in he financial balance. A defici on he curren accoun insead means ha he ne purchaser abroad mus pay eiher by selling exernal asses or by increasing exernal liabiliies. This means ha if, for insance, Sweden were o buy more asses abroad han are sold abroad (his is he same as saying ha he ne oal of he financial balance is less han zero), Sweden mus a he same ime sell more goods and service abroad han i buys from abroad. Pu simply, he oal ouward paymens from a counry mus correspond o he oal inflow of paymens. The inernaional invesmen posiion shows a counry's oal ne deb and repors in he form of sock daa on all domesic secor asses and liabiliies abroad. The ne oal of asses and liabiliies is hus a measure of a counry's wealh relaive o oher counries. Sock daa is repored a marke value and can be divided up exacly like he financial balance, ino direc invesmen, porfolio invesmen, financial derivaives, oher invesmen and he foreign currency reserve. 7 The relaionship beween he inernaional invesmen posiion and he ransacions in he balance of paymens is illusraed below. Changes in he ne exernal posiion are due o ransacions ha have been implemened and regisered in he financial balance and o changes in exchange raes and asse prices. In addiion, he socks can be affeced by, for insance, wrie-downs of claims (an example of oher correcions in he diagram). If he curren accoun shows a defici or surplus over a longer period of ime, his enails a build-up of eiher a ne liabiliy or a ne asse. Changes in he inernaional invesmen posiion depending on Opening balance Transacions Price changes Exchange rae changes Oher correcions Closing balance 6 As he financial balance measures exernal ne lending, a change in he balance on he curren accoun will - by definiion - always be mached by a similar change in he ne exernal claims. 7 In cerain cases he book value is used insead of he marke value, because he base for calculaing marke value is insufficien. 13