BALANCE OF PAYMENTS DATE: 27-11-27 PUBLISHER: Saisics Sweden Balance of Paymens and Financial Markes (BFM) Maria Falk +46 8 6 94 72, maria.falk@scb.se Camilla Bergeling +46 8 6 942 6, camilla.bergeling@scb.se Nex quarerly publishing: 28-2-28 Third quarer 27 Balance of Paymens The balance of paymens for he hird quarer shows a surplus of roughly SEK 41 billion, a sligh negaive capial balance and a negaive financial balance of abou SEK 133 billion. The curren accoun balance for he hird quarer of 27 shows a surplus of 41.2 billion. The rade in services balance amouned o SEK 22.4 billion, and curren ransfers improved by SEK 2.7 billion, hus conribuing o he surplus in he curren accoun. However, he rade balance worsened by SEK 8.9 billion, largely due o he sharp downurn in expors. Facor incomes also fell by SEK.9 billion during he hird quarer of 27, compared o he same period in 26. Porfolio invesmens accouned for he larges ouflow of SEK 77. billion in he financial accoun, which gave a ne ouflow of SEK 133.3 billion. Saisics Sweden has produced and published Sweden's Balance of Paymens on behalf of he Riksbank since Sepember 27. All saisics concerning he balance of paymens are available on Saisics Sweden's websie www.scb.se 1
Curren balance, ne (see Table A) Curren accoun The curren accoun showed a surplus of SEK 41.2 billion in he hird quarer 27, which is SEK 4.8 billion less han he amoun for he same period in 26. The surplus originaes from he balance of rade in services, which amouned o SEK 22.4 billion. This sum is SEK 2.2 billion more compared o he same period in 26. Curren accouns also conribued o he surplus, which improved by SEK 2.7 billion from a defici of SEK 11.2 billion he same quarer las year o SEK 8.6 billion he hird quarer of 27. 7 6 4 3 2 1 4 6 6 6 6 7 7 7 The rade balance deerioraed by SEK 8.9 billion, and facor incomes by.9 billion. Trade in goods balance (see Table A) Trade in goods balance The surplus in he rade in goods balance amouned o SEK 19.9 billion during he hird quarer his year, a decline of SEK 8.9 billion compared o he same period in 26. The weak ne rade balance during he hird quarer is mainly due o he sharp downurn in expors o he US while impors are sill a he same levels. Expors rose during he hird quarer by SEK 14.3 billion, while he corresponding increase of impors amouned o SEK 23.1 billion. 4 4 3 3 2 2 1 1 4 6 6 6 6 7 7 7 2
Trade in services balance Trade in services balance (see Table G) 3 The surplus in he rade in services balance amouned o SEK 22.4 billion during he hird quarer his year, an increase of SEK 2.2 billion compared o he same period in 26. Trade in services has fallen somewha compared o he second quarer of 27. The main reason is because of a decline in expors. Compared o corresponding quarer las year, expors have increased by SEK 11. billion and impors by SEK 9.3 billion. Transporaion showed an increased surplus of SEK.7 billion, which is a sligh increase compared o he same period in 26. The iems licences/royalies and oher business services accouned for he major par of he increased surplus in rade in services compared o he corresponding period in 26. Licences/royalies showed a surplus of SEK 6.6 billion, which is SEK 2 billion more han he corresponding period las year. Concerning oher business services, merchaning accouned for he larges conribuion o he increase, a surplus of SEK 12.3 billion, which is SEK 1.4 billion more han las year. This iem consiss of Swedish companies' purchases and sales abroad of goods which do no cross he Swedish border. Merchaning is defined as he rade margin, i.e. he difference beween he purchase price and he sales price. The iem for ravel showed a defici of SEK 2.7 billion, which is somewha higher han he hird quarer of 26. 2 2 1 1 4 6 6 6 6 7 7 7 Income balance (see Table H) Income balance Income, which consiss of compensaion of employees and invesmen income, showed a surplus of SEK 7.4 billion during he hird quarer of 27. This is a deerioraion of abou SEK.9 billion compared o he same period las year. The deerioraion sems from earnings on capial, while he compensaion of employees remains largely unchanged. 2 1 1 - -1-1 -2 4 6 6 6 6 7 7 7 3
- Direc invesmen income balance, ne Income on direc invesmen showed a ne inflow of SEK 16. 14 billion during he hird quarer of 27. Income from direc 12 invesmens abroad amouned o SEK 6.6 billion, while 1 8 income on corresponding foreign direc invesmen in Sweden 6 oalled SEK 44.1 billion. This iem mainly consiss of profis in 4 direc invesmen companies, and, o a lesser exen, of 2 ineres on loans wihin a direc invesmen relaionship. Direc invesmen income balance, ne (see Table H) 2 18 16 4 6 6 6 6 7 7 7 Porfolio invesmen income balance, ne (see Table H) - Porfolio invesmen income balance, ne Income on porfolio invesmen resuled in a ne ouflow of SEK 6.9 billion during he hird quarer of 27, or SEK 3.4 billion more han he same period las year. The main reason is due o a drop in he ne ouflow of share income by SEK.2 billion. During he firs hree quarers of 27, income from porfolio invesmens abroad generaed an ouflow of SEK 37.8 billion, which is comparable o he ouflow of SEK 34.1 billion for he same period in 26. The ne ouflow of he ineres iem fell from SEK 34.1 o 28.6 billion. However, he ne of share dividends increased o an ouflow of SEK 9.2 billion, which can be compared o a ne ouflow nearly a nil for he same period in 26. - -1-1 -2-2 -3-3 4 6 6 6 6 7 7 7 4
Oher invesmen income balance, ne (see Table H) - Oher invesmen income balance, ne Income on oher invesmen income gave rise o a ne ouflow of SEK 1.6 billion during he hird quarer of 27, which can be compared o he ne ouflow of SEK 2.3 billion during he same period in 26., -, -1, -1, -2, -2, -3, Compared o he hird quarer of 26, inflow of oher invesmen income from abroad increased from SEK 12.2 billion o 13.8 billion in he hird quarer of 27. A he same ime he ouflow of oher invesmen income from Sweden increased from SEK 14. billion o 1.4 billion. -3, -4, -4, 4 6 6 6 6 7 7 7 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 respecively owards counerpars abroad. Curren ransfer and capial accoun balance, ne (see Table I) Curren ransfer and capial accoun balance, ne The ne sum of curren ransfers and he capial balance gave a defici of SEK 9. billion during he hird quarer his year, which is an improvemen of SEK 1.8 billion compared wih he same period in 26. - -1-1 -2 Transacions linked o EU membership showed a defici of 3.6 billion, which is SEK 1.9 billion less han in he hird quarer of 26. This improvemen is mainly due o larger subsidies/reurn flow from he EU. The defici for foreign aid amouned o SEK 3.6 billion, which is SEK.8 billion more han he same period las year. The iem oher ransfers - all oher ransfers no conneced o foreign aid or he EU - improved by SEK.7 billion compared o he hird quarer of 26. -2-3 4 6 6 6 6 7 7 7
Financial accoun (see Table J) Financial accoun The financial accoun gave a ne ouflow of SEK 133.3 billion during he hird quarer of 27. The main conribuion o his came from porfolio invesmen, which accouned for he larges ouflow, SEK 77. billion. Direc invesmens accouned for an ouflow of SEK 6.3 billion, while oher invesmen gave rise o a ne inflow of SEK 8.3 billion. The surplus on he curren accoun for he hird quarer of 27 of SEK 41 billion, a slighly negaive capial balance and he negaive financial accoun of SEK 133 billion gave rise o a posiive errors and omissions iem of SEK 93 billion. The errors and omissions iem describes he ne oal of he ransacions for which here was no explanaion, and hus consiss of various deficiencies in he daa. One of he mos imporan explanaions for he errors and omissions iem during separae quarers is periodisaion errors. As he daa in he balance of paymens are gahered from differen sources, he periodisaion of ransacions may differ for iems ha are balanced agains one anoher. In he longer erm however, he errors and omissions should offse one anoher. 4 3 2 1-1 -2-3 -4-4 6 6 6 6 7 7 7 Swedish invesmen abroad Invesmen in Sweden Direc invesmen (see Table J) Direc invesmen 1 During he hird quarer of 27, direc invesmen resuled in a ne ouflow of SEK 6.3 billion. Swedish invesmen abroad gave an ouflow of SEK 88.1 billion during he quarer; SSAB's acquisiion of he Norh American IPSCO accouned for a significan amoun of he gross ouflow. Foreign invesmen in Sweden resuled wih an inflow of SEK 27.8 billion. During hree firs hree quarers of 27, direc invesmen has generaed a ne ouflow of SEK 124.8 billion, o be compared wih a ne inflow of SEK 21. billion for he same period in 26. 1 - -1 4 6 6 6 6 7 7 7 Swedish invesmen abroad Invesmen in Sweden 6
Porfolio invesmen (see Table J) Porfolio invesmen Cross-border porfolio invesmen generaed capial ouflows of SEK 77. billion during he hird quarer of 27, which can be compared o SEK 2.3 billion for he same period he year before. The larges ouflows are found wihin he primary markes of banks and housing finance insiuions in securiies denominaed in oher currencies. Cross-border equiy rading resuled in a ne ouflow of SEK 43.2 billion during he quarer, which was higher han he ne ouflow of SEK 1.1 billion for he same period las year. 2 2 1 1 - -1-1 -2 4 6 6 6 6 7 7 7 Swedish invesmen abroad Invesmen in Sweden In oal, porfolio invesmen resuled in a ne ouflow of SEK 93.1 billion during he firs hree quarers of 27. The corresponding figure for he same period las year was SEK 19. billion. Oher invesmen (see Table J) Oher invesmen Oher invesmen gave rise o a ne inflow of 8.3 billion during he hird quarer of 27. Swedish invesmen abroad gave rise o a ne ouflow of SEK 82. billion while corresponding foreign invesmen in Sweden resuled in a ne inflow of SEK 9.8 billion. 3 2 1-1 -2-3 The value of invesmen in oher capial varies considerably from one quarer o he nex and i is usually shor-erm capial movemens beween banks in Sweden and counerparies abroad which have creaed hese flucuaions. -4 4 6 6 6 6 7 7 7 Swedish invesmen abroad Invesmen in Sweden Oher invesmen covers ransacions regarding deposis and borrowing, lending, repo ransacions, ec. 7
Inernaional invesmen posiion, ne (see Table E) Inernaional invesmen posiion, ne -1 The posiion wih he res of he world is presened on a halfyearly basis, and in June 27 Swedish asses abroad amouned o SEK 6 869 billion according o preliminary figures. A he same ime, Swedish debs wih foreign counries amouned o SEK 7 19 billion. Thus he Swedish ne deb amouned o SEK 24 billion. Ne asses in he form of direc invesmens have been forecased a SEK 36 billion, which is 6 billion higher han December 26. Ne deb in he form of porfolio invesmen is calculaed o have fallen o SEK 6 billion. Behind his change is an increase in he asses in foreign equiy and deb securiies of SEK 342 billion and an increase in foreign invesors' holdings of Swedish securiies of SEK 183 billion. 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. I is imporan o noe ha several sub-iems in he inernaional invesmen posiion for June 27, such as direc invesmen and porfolio shares, are forecass. The figures should herefore be inerpreed wih cauion. -2-3 -4 - -6-7 -8-9 Jun 97 98 99 1 2 3 4 6 7 8
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: The balance on he curren accoun, which shows rade in goods and services, wages, earnings on financial asses and liabiliies as well as curren ransfers, such as EU subsidies and conribuions. The capial balance, which covers EU subsidies and foreign aid for real invesmen as well as he purchase and sale of righs, such as paens. The financial balance, which can be divided ino direc invesmen, porfolio invesmen, financial derivaives, oher capial and he foreign currency reserve. The financial balance 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) F By adding ogeher he ne facor incomes,, i.e. Swedish facor income earned abroad (Swedish wageearners remuneraion abroad and earnings on Swedish 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 GNI = C + I + G + X M + F. (2) Rewriing (2) gives: GNI C G = S = I + X M + F, (3) 2 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. 9
S where 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. 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 +1 <. 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. This relaionship means in acual fac ha he public secor's budge balance will covary wih he balance of rade during cerain periods of ime.
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 services 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 capial 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 a number of differen sources are used o measure he iems in he balance of paymens, boh measuremen errors and periodisaion errors can arise, and a residual is herefore included in he form of an errors and omissions iem. 7 In cerain cases he book value is used insead of he marke value, because he base for calculaing marke value is insufficien. 1