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1 RKET BALANCE OF PAYMENTS AND FINANCIAL MA REPORT 2015 All officiell saisik finns på: Saisikservice: fn All official saisics can be found a: Saisics service, phone Balance of paymens 2014

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3 Balance of paymens 2014 Saisiska cenralbyrån Saisics Sweden 2015

4 Balance of Paymens 2014 Saisics Sweden 2015 Producer Saisics Sweden, Balance of Paymens and Financial Markes Box SE Sockholm Enquiries Fredrik Öhrsröm, Jenny Peersson Eksed, I is permied o copy and reproduce he conens in his publicaion. When quoing, please sae he source as follows: Source: Saisics Sweden, Balance of Paymens Cover: Aeljén, SCB Phoo: isock URN:NBN:SE:SCB-2015-FM04BR1501ENG_pdf (pdf) This publicaion will only be published on

5 Balance of paymens Foreword Foreword The balance of paymens has been compiled and published by Saisics Sweden on behalf of he Swedish Riksbank since The balance of paymens is a compilaion of Sweden s real and financial ransacions wih he res of he world, and is divided ino he curren accoun, he capial accoun and he financial accoun. This repor covers he oucome for Saisics Sweden, March 2015 Folke Carlsson Ebba Harzell A word of hanks We are indebed o our respondens privae individuals, enerprises, agencies and organisaions wih whose cooperaion Saisics Sweden is able o produce reliable and imely saisics ha mee he sociey s demand for accurae informaion.

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7 Balance of paymens Conens Conens Foreword 1 Summary 4 1 Curren accoun Trade in goods Trade in services Primary income Secondary income Capial accoun 11 3 Inernaional invesmen posiion and financial accoun Direc invesmen Porfolio invesmen Financial derivaives Oher invesmen Reserve asses Facs abou he saisics 19 Derivaion of he balance of paymens The connecion wih he inernaional invesmen posiion

8 Balance of paymens Summary Summary The curren accoun showed a surplus of SEK 245 billion in The surplus has hereby decreased compared o 2013 when i amouned o SEK 276 billion. The surplus in rade in goods and services fell from SEK 217 billion in 2013 o SEK 182 billion in The defici in secondary income has increased and amouned o SEK 68 billion compared o a defici of SEK 64 billion in Togeher his has conribued o a reduced surplus in he curren accoun in Ne, SEK billion curren accoun 2 capial accoun 3 financial accoun Source: Saisics Sweden The capial accoun recorded a defici of jus over SEK 4 billion in The defici has hereby decreased compared o he previous year when i amouned o jus over SEK 9 billion. Transacions in he financial accoun gave rise o a capial ouflow of SEK 113 billion. Direc invesmen and porfolio invesmen ransacions resuled in capial ouflows of SEK 15 billion and SEK 161 billion respecively in Reserve asses also conribued SEK 1 billion o he capial ouflow. Oher invesmen and financial derivaives gave rise o capial inflows of SEK 43 billion and SEK 21 billion respecively. Provisional daa indicae ne liabiliies of SEK 156 billion in he inernaional invesmen posiion a he end of Ne liabiliies have hereby decreased compared o he end of 2013 when hey amouned o SEK 681 billion. Ne liabiliies in 2014 correspond o abou 4 percen of GDP. The inernaional invesmen posiion is also published wih direc invesmen a marke value and showed ne asses of SEK 562 billion. 4

9 Balance of paymens Curren accoun 1 Curren accoun The curren accoun showed a surplus of SEK 245 billion in The surplus has decreased compared o 2013 when i amouned o SEK 276 billion. The curren accoun surplus corresponded o jus over 6 percen of GDP in Table 1.1 Curren accoun wih sub-iems Ne, SEK billion curren accoun rade in goods rade in services primary income secondary income Source: Saisics Sweden Foonoe: Primary income and secondary income are new conceps in connecion wih he ransiion o BPM6 (Balance of Paymens Manual 6). They are described in more deail under headings 1.3 and 1.4. I is mosly rade in goods and services ha has conribued o he surplus in he curren accoun, wih a surplus of SEK 182 billion. Primary income has also conribued a significan surplus while secondary income has conribued a defici. The surplus in goods and services has decreased while he surplus in primary income has increased. The defici in secondary income has, on he oher hand, increased slighly. Togeher his has conribued o a reduced surplus in he curren accoun in Las year Sweden was one of he counries in Europe wih he larges surplus in he curren accoun. 5

10 Balance of paymens Curren accoun Figure 1.1 Curren accoun, percen of GDP 10% 8% 6% 4% 2% 0% -2% -4% Source: Saisics Sweden A he end of he 1980s and he beginning of he 1990s, however, here was a considerable defici in he curren accoun. The curren accoun hen urned ino a surplus, which increased subsanially in he earlyand mid-2000s, only o decrease again afer he financial crisis in Figure 1.2 Sub-iems in he curren accoun SEK, bn Trade in goods Trade in services Primary income Secondary income -100 Source: Saisics Sweden 6

11 Balance of paymens Curren accoun 1.1 Trade in goods Trade in goods showed a surplus of SEK 118 billion in The surplus fell compared o he previous year when i amouned o SEK 137 billion. Expors increased by 4 percen while impors increased by 6 percen. The rend in rade in goods has indicaed a narrowing surplus for a long ime and coninued in he same direcion during The surplus in rade in goods grew subsanially during he second half of he 1990s and was a is highes level a he beginning of he 2000s. Since jus before he financial crisis in 2008, however, i has been on a downward rend. Trade in goods wih EU and non-eu counries shows slighly differen paerns. Boh expors and impors increased during 2014 bu o differing exens which gave a reduced surplus in relaion o non-eu counries while he rade defici wih EU counries decreased slighly. Merchaning, which afer he ransiion o he new manual is now a par of rade in goods, has conribued a significan surplus. Of he surplus in rade in goods in 2014, merchaning conribued SEK 80 billion and he iem has shown an upward rend in recen years. Merchaning is he sales margin ha arises when Swedish enerprises buy goods abroad and sell hem o anoher counry wihou imporing hem ino Sweden. Figure 1.3 Trade in goods SEK, bn Source: Saisics Sweden Expor Impor Trade in goods, ne (righ axes) Expors and impors of goods have declined since he financial crisis. Boh expors and impors rose up unil 2008 bu decreased dramaically 7

12 Balance of paymens Curren accoun in 2009 only o recover again in 2010 and They hen gradually decreased in 2012 and 2013 bu hen began o increase again during 2014 even hough hey did no reach he levels of previous years. Impors of goods rose more han expors, which weakened he rade in goods figures for Trade in services Trade in services generaed a surplus of SEK 64 billion in The surplus in rade in services has decreased compared o 2013 when i amouned o SEK 80 billion. Figure 1.4 Trade in services SEK, bn Source: Saisics Sweden Expors of services amouned o SEK 516 billion and increased by 8 percen while impors amouned o SEK 452 and rose by 14 percen compared o The fac ha impors have increased more han expors has weakened he rade in services figures for he firs ime afer a long period of increasingly srong figures. Among he differen ypes of services, ranspor conribued a surplus of SEK 19 billion in 2014 while ravel conribued a defici of SEK 40 billion. The defici in ravel implies ha expenses of Swedes when ravelling abroad exceed hose of foreign ouriss ravelling in Sweden. Telecommunicaion, compuer and informaion services conribued a surplus of SEK 57 billion. Charges for he use of inellecual propery also Expor Impor Trade in services, ne (righ axes) 8

13 Balance of paymens Curren accoun conribued a surplus of SEK 36 billion. The surplus in boh hese iems has increased considerably seen over a longer period of ime. Sweden is a ne imporer of research and developmen services, and he iem showed a defici of SEK 30 billion in The defici has grown compared o he year before when i amouned o SEK 20 billion, which depends on increased impors. Togeher wih a reduced surplus in echnical, rade-relaed and oher business services, his has primarily conribued o weaker rade in services figures for Expors of services o Norway amouned o SEK 71 billion in 2014 making Norway he larges counerpar counry for Swedish expors of services. As regards impors of services, he Unied Saes was he larges counerpar counry. Table 1.2 Trade in services, larges counerpar counries Trade in services wih he larges counerpar counries (SEK billion) Expors Impors NO 70.5 US 57.2 US 59.2 GB 43.3 DE 41.5 DE 41.5 GB 38.2 DK 35.1 DK 34.3 NO 30.7 Toal Toal Source: Saisics Sweden Seen over a longer period of ime, boh expors and impors of services have increased considerably, wih he excepion of he immediae afermah of he financial crisis in Expors of services have risen from SEK 321 billion in 2006 o SEK 516 billion in Impors of services have also increased considerably, from SEK 287 billion in 2006 o SEK 452 billion in The fac ha expors have increased more he impors has srenghened he rade in services figures and now 9

14 Balance of paymens Curren accoun conribues o a significan share of he curren accoun surplus. Among he differen ypes of services, he surplus has increased he mos in compuer services. 1.3 Primary income Primary income, which refers mainly o invesmen income and compensaion of employees, showed a surplus of SEK 131 billion in The surplus in primary income has increased compared o 2013 when i amouned o SEK 123 billion. Compensaion of employees gave a surplus of SEK 20 billion while invesmen income gave a surplus of SEK 110 billion and oher primary income gave a surplus of SEK 0.5 billion. Figure 1.5 Primary income SEK, bn Expor Impor Primary income, ne (righ axes) Source: Saisics Sweden The sronger invesmen income figures come mainly from income from porfolio invesmen which amouned o SEK 10 billion in 2014 compared o 2013 when he iem showed a defici of SEK 3 billion. Income has hence swiched o posiive afer having been negaive for a longer period of ime. Income from direc invesmen coninue o make up a significan share of he invesmen income bu have decreased from SEK 101 billion in 2013 o SEK 93 billion in Income from Swedish direc invesmen abroad 10

15 Balance of paymens Curren accoun amouned o SEK 223 billion, while income from foreign direc invesmen in Sweden oalled SEK 130 billion. Oher invesmen generaed posiive income of SEK 3 billion. Income has decreased on boh he asse side and he liabiliy side in recen years due o he low ineres raes. A he same ime, ne asses wihin oher invesmen abroad have increased which affecs ne income. Primary income was negaive for a long ime bu swiched o posiive a he beginning of he 2000s. The surplus has gradually increased since hen and now consiues a major share of he curren accoun surplus. Even if he inernaional invesmen posiion is currenly negaive, invesmen income is posiive. The composiion of he inernaional invesmen posiion shows ha he asse side mosly comprises shares and equiy while he liabiliy side mosly consiss of deb securiies. This is refleced in he fac ha primary income has been posiive for a long period while he foreign invesmen posiion has shown a ne liabiliy. 1.4 Secondary income The defici in secondary income amouned o SEK 68 billion in The defici has increased compared o he previous year when i amouned o SEK 64 billion. The defici in ransfers o and from he EU increased. Developmen assisance o oher counries also rose. Oher secondary income was on a par wih Secondary income shows curren ransfers beween Sweden and oher counries. A curren ransfer is a ransfer wihou receiving anyhing in reurn and affecs disposable income. 2 Capial accoun The capial accoun gave a defici of jus over SEK 4 billion in The defici has hereby narrowed compared o he previous year when i amouned o jus over SEK 9 billion. 11

16 Balance of paymens Inernaional invesmen posiion and financial accoun 3 Inernaional invesmen posiion and financial accoun Provisional daa indicae ne liabiliies of SEK 156 billion in he inernaional invesmen posiion a he end of Ne liabiliies have hereby decreased compared o he end of 2013 when hey amouned o SEK 681 billion. Ne liabiliies in 2014 correspond o abou 4 percen of GDP. Table 3.1 Inernaional invesmen posiion wih sub-iems ne (SEK billion) inernaional invesmen posiion, oal direc invesmen porfolio invesmen financial derivaives oher invesmen reserve asses Source: Saisics Sweden Ne exernal liabiliies have decreased a he same ime as he curren accoun showed a surplus of SEK 245 billion. The surplus in he curren accoun was no quie offse by capial ouflows in he financial accoun, which showed a capial ouflow of SEK 113 billion. This gave rise o a significanly negaive ne errors and omissions iem. Ne errors and omissions occur when a surplus/defici in he curren accoun ogeher wih he capial accoun is no offse by equally large capial ouflows in he financial accoun. 12

17 Balance of paymens Inernaional invesmen posiion and he financial accoun Table 3.2 Financial accoun wih sub-iems ne (SEK billion) financial accoun, oal direc invesmen , porfolio invesmen financial derivaives oher invesmen Source: Saisics Sweden The curren accoun has been posiive since he mid-1990s bu i is primarily during he 2000s ha i has shown a significan surplus. The figure below shows he acual inernaional invesmen posiion as a percenage of GDP and how he posiion would have developed had i followed he curren accoun exacly. The figure shows ha ne liabiliies in he inernaional invesmen posiion have decreased over ime bu ha he posiion has no improved in line wih he curren accoun surplus. The inernaional invesmen posiion is also published wih direc invesmen a marke value and showed ne asses of SEK 562 billion. 13

18 Balance of paymens Inernaional invesmen posiion and he financial accoun Figure 3.1 Inernaional invesmen posiion 70% 60% 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% IIP, percen of GDP IIP, accumulaed curren accoun, % of GDP Source: Saisics Sweden Changes in he inernaional invesmen posiion arise from boh ransacions in he financial accoun and changes in share prices, ineres raes and currency exchange raes. The relaionship beween he opening and closing balance is summarised in he figure below. Opening balance Changes in he inernaional invesmen posiion depending on Transacions Price changes Exchange rae changes Oher correcions Closing balance The balance shee oal in he inernaional invesmen posiion has increased dramaically during he 2000s wih a significan gross increase in exernal asses and liabiliies. The composiion of he inernaional invesmen posiion shows ha he asse side mosly comprises shares and equiy while he liabiliy side mosly consiss of deb securiies and loans, which is refleced in he earnings. In addiion, much of he asse side is denominaed in foreign currency while he liabiliy side is mosly denominaed in SEK. Taken ogeher, his makes he ne inernaional 14

19 Balance of paymens Inernaional invesmen posiion and he financial accoun invesmen posiion sensiive o changes in exchange raes, ineres raes and share prices. In 2014, sock marke raes have risen while ineres raes have fallen. A he same ime, he krona has weakened significanly agains he major currencies, which has helped o increase he value of asses denominaed in foreign currencies. All in all, his has conribued o a reducion in ne liabiliies in he foreign invesmen posiion. The exernal exposure of domesic secors is repored in he secor-bysecor inernaional invesmen posiion. I shows ha moneary financial insiuions and non-financial corporaions accoun for a large share of exernal asses and liabiliies. Boh have significan ne exernal liabiliies. The moneary financial insiuions have considerable borrowings from abroad in deb securiies while hey simulaneously deposi large amouns in accouns abroad wihin he oher invesmen iem. The social insurance secor and oher financial insiuions have significan ne exernal asses. The non-financial enerprises have considerable direc invesmen abroad while oher counries own significan amouns in nonfinancial corporaions in Sweden, mosly in he form of direc invesmen bu also in he form of porfolio invesmen. The Swedish sae has ne exernal liabiliies, while he Riksbank has ne asses in he form of reserve asses. 3.1 Direc invesmen In oal, direc invesmen ransacions gave a capial ouflow of SEK 15 billion in These ransacions increased Swedish direc invesmen abroad by SEK 83 billion. Transacions increased foreign direc invesmen in Sweden by SEK 69 billion. Transacions in Swedish direc invesmen abroad came mosly from profis reinvesed in foreign companies. Reinvesmen of earnings gave and invesmen of SEK 133 billion. Equiy and loan ransacions have insead conribued o a decrease of SEK 47 billion and jus under SEK 3 billion respecively. Wihin foreign direc invesmen in Sweden, ransacions in equiy and reinvesmens of earnings have conribued o a rise of SEK 12 billion and SEK 73 billion respecively, while loans have made a negaive conribuion of SEK 16 billion. 15

20 Balance of paymens Inernaional invesmen posiion and he financial accoun The balances show ha Swedish direc invesmen abroad amouned o SEK 2936 billion a he end of 2014 while foreign direc invesmen in Sweden oalled SEK 2484 billion. Taken ogeher, his gives ne asses wihin direc invesmen of SEK 452 billion for I is mosly his ha has conribued o a reducion in ne liabiliies in he inernaional invesmen posiion. As a supplemen, direc invesmen calculaed a marke value is presened. Direc invesmen a marke value gives ne asses of SEK 1170 billion for When repored in erms of direc invesmen a marke value, he inernaional invesmen posiion swiches from negaive o posiive. Mos direc invesmen is o be found in he non-financial corporaion secor. Moneary financial insiuions also have significan direc invesmen. 3.2 Porfolio invesmen Porfolio invesmen ransacions gave a capial ouflow of SEK 161 billion in The lion s share of hese comes from Swedish invesmen in foreign porfolio invesmen. Ne purchases of foreign deb securiies amouned o SEK 135 billion during he year, mosly in he form of American and Finnish bonds. Purchases of foreign shares and muual fund unis also conribued SEK 83 billion o he capial ouflow. Via rade, oher counries increased heir invesmen in Swedish porfolio invesmens by SEK 57 billion. Oher counries made ne purchases of Swedish shares, muual fund unis and deb securiies. Swedish shares and muual fund unis were purchased for SEK 13 billion ne. Swedish deb securiies were purchased for SEK 44 billion ne. Invesmens in Swedish governmen-issued securiies were of paricular ineres, boh shor-erm and long-erm securiies, which were bough for SEK 160 billion ne during he year. Foreign invesors mosly bough Swedish deb securiies denominaed in SEK. All in all, Sweden has ne exernal liabiliies in porfolio invesmen of SEK 1889 billion. Swedish porfolio invesmen abroad amouned o SEK 4423 billion a he end of 2014 and he value of foreign porfolio invesmen in Sweden oalled SEK 6312 billion. Boh Swedish porfolio invesmen abroad and foreign porfolio invesmen in Sweden have increased compared o he end of 2013, 16

21 Balance of paymens Inernaional invesmen posiion and he financial accoun Ne liabiliies in porfolio invesmen have increased dramaically in recen years, wih increased ne liabiliies in deb securiies generaed by increased borrowings from abroad. The ne liabiliy o oher counries decreased by SEK 98 billion in Holdings of Swedish deb securiies by oher counries have coninued o increase as in previous years. The reducion in ne liabiliies is insead due o an increase in Swedish holdings of foreign shares and muual fund unis. During he year, holdings of foreign shares and muual fund unis have gone from SEK 2577 billion o SEK 3210 billion, wih he larges increase being a oher financial insiuions, whose holdings amouned o SEK 1774 a he end of he year. The increase in shares and muual funds is mosly due o a sharp upurn in he sock marke along wih a weakening krona. 3.3 Financial derivaives Transacions in Financial derivaives gave rise o a capial inflow of SEK 21 billion in Transacions in financial derivaives consis primarily of swap conracs in ineres raes and foreign exchange; he foremos holders are he major Swedish banks. Financial derivaives are mainly used o safeguard invesmen. A he end of 2014, financial derivaives showed ne exernal asses of SEK 128 billion. The value of asses amouned o SEK 613 billion and exceeded he value of liabiliies which amouned o SEK 485 billion. Posiive marke valued conracs wih foreign counerparies are defined as asses, and negaive marke valued conracs are similarly defined as liabiliies. Flucuaions in ineres raes and exchange raes in recen years have led o higher balances in financial derivaives. 3.4 Oher invesmen Oher invesmen ransacions, which mainly consis of loans and deposis, gave a capial inflow of SEK 43 billion in Transacions increased Swedish asses in oher invesmen abroad by SEK 16 billion. Transacions on he liabiliy side in oher invesmen gave rise o an increase of SEK 59 billion in There have been large ransacions in oher invesmen abroad for a longer period of ime ever since Swedish invesors began deposiing large amouns in overseas accouns. The balances in oher invesmen showed ne asses of SEK 663 billion a he end of The value of Swedish oher invesmen abroad amouned 17

22 Balance of paymens Inernaional invesmen posiion and he financial accoun o SEK 2884 billion while foreign-owned oher invesmen in Sweden amouned o SEK 2221 billion. Seen over a longer period of ime, oher invesmen has swiched from ne liabiliy o ne asse. A he end of 2008, oher invesmen had ne liabiliies abroad of SEK 533 billion, which has now urned ino significan ne asses. The larges share of his oher invesmen is made up of deposis. Oher invesmen is dominaed by moneary financial insiuions. The changes in oher invesmen reflec he changes in porfolio invesmen. A he same ime as oher invesmen has gone from ne liabiliy o ne asse, ne liabiliies in deb securiies wihin porfolio invesmen have increased. 3.5 Reserve asses Reserve asses are he Riksbank s reserves of gold, securiies and oher asses in foreign currencies. Their main purpose is o provide emporary liquidiy assisance o insolven banks, fulfil Sweden s obligaions vis-avis he Inernaional Moneary Fund (IMF) and, if necessary, inervene on he foreign exchange marke. The reserve asses generaed a capial ouflow of jus over SEK 1 billion in A he end of 2014, he reserve asses amouned o SEK 490 billion. They have increased compared wih he end of 2013 when hey amouned o SEK 420 billion. A weaker krona in 2014 is he main reason for he increase in reserve asses. In recen years, he Riksbank has srenghened is reserve asses significanly, paricularly in 2009 and

23 Balance of paymens Facs abou he saisics Facs abou he saisics The balance of paymens has been produced and summarised by Saisics Sweden on behalf of he Swedish Riksbank since Sepember In a closed economy, he level of invesmen is deermined by he oal savings in he economy. This means ha if 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. Simply pu, i is a summary of a counry s real and financial ransacions wih he res of he world. The main aggregaes in he balance of paymens are he curren accoun, he capial accoun, and he financial accoun. Derivaion of he balance of paymens A counry s gross domesic produc, BNP, is he oal value of he goods and services produced in he counry during a cerain year. Producion is used o eiher saisfy domesic demand in he form of household 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 ): BNP = C + I + G + X M. 1 (1) 1 This relaionship is called an ideniy because i mus by definiion be fulfilled in every individual ime period. 19

24 Balance of paymens Facs abou he saisics By adding ogeher he primary and secondary incomes, PI, SI, i.e. Swedish income earned abroad (Swedish employees compensaion abroad and earnings on Swedish capial abroad) minus foreign income earned in Sweden (foreign employees compensaion in Sweden and earnings on foreign capial in Sweden) and curren ransfers, i is possible o rewrie (1) in erms of gross naional income, BNI : 2 BNI C + I + G + X M + PI + SI = (2) Rewriing (2) gives: BNI C G = S = I + X M + PI + SI, (3) 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 household savings, BNI T C. 3 According o (3) he following applies: =. (4) S I X M + PI + SI The difference beween and he difference beween X and X M + F is he curren accoun. S and I is ofen called ne exernal invesmen M is called balance of rade. Equaion (4) hus shows ha here is a simple connecion beween ne invesmen and he balance of rade. For a given ne facor income, changes in he difference beween S and I will always be followed by 2 This income is ofen referred o as primary income. Ne income consiss of compensaion of employees, invesmen income and curren ransfers. 3 This means hen ha naional savings are idenical o he sum of public secor savings and household savings. 20

25 Balance of paymens Facs abou he saisics 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 balance of rade defici 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 household savings are as large 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 consolidaed public secor savings and household savings, domesic invesmen can be divided up ino public secor invesmen and privae invesmen. This division indicaes ha if public secor invesmen exceeds is savings, and if his is no compleely counerbalanced by a savings surplus in he privae secor, i mus by definiion be mached by a defici in he curren accoun. A growing defici in he curren accoun can hus be a sign ha cenral governmen expendiure is greaer han 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: BNP + + (6) r A = C + I + G + A A ). ( 1 where A is he ne exernal asses during period and r A is he ineres income on hese asses. The ne asses in urn consis of he capial accoun and he financial accoun. I is simple o obain he balance of paymens from (1) and (6): 4 Ne facor income is assumed o be consan in he shor erm. 5 This relaionship means in acual fac ha he public secor budge balance will covary wih he balance of rade during cerain periods of ime. 21

26 Balance of paymens Facs abou he saisics X. (7) M + PI + SI = ( A A 1) + The lef side of he balance of paymens (7) is, as menioned earlier, he curren accoun, which consiss of he sum of he rade in goods and primary and secondary 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 accoun and he financial accoun will show a ne defici, i.e. A A +1 < 0. Equaion (7) hus means ha he sum of he curren accoun, he capial accoun and he financial accoun is always idenical o zero. 6 The connecion wih he inernaional invesmen posiion As he financial accoun measures exernal ne lending, a change in he curren accoun will - by definiion - always be mached by a similar change in he ne exernal claims. A surplus in 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 reserve asses, as hese reserve ransacions are included in he financial accoun. A defici on he curren accoun insead means ha he ne acquisiions abroad mus be paid eiher by divesing 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 accoun 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 ouflow of paymens from a counry mus correspond o he oal inflow of paymens. 6 Measuremen errors, such as periodisaion errors, can arise because here are a number of sources for measuring he iems in he balance of paymens. Thus, a residual in he form of an errors and omissions iem has been included. 22

27 Balance of paymens Facs abou he saisics The inernaional invesmen posiion shows a counry s oal ne deb and is repored in he form of sock daa on all he domesic secor s exernal asses and liabiliies. The ne oal of asses and liabiliies is hus a measure of a counry s wealh relaive o oher counries. Sock daa are repored a marke value and can be divided up exacly like he financial accoun, ino direc invesmen, porfolio invesmen, financial derivaives, oher invesmen, and reserve asses. 7 The relaionship beween he inernaional invesmen posiion and 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 accoun and o changes in exchange raes and asse prices. In addiion, he socks can be affeced by, for insance, wriedowns of claims (an example of oher correcions in he graph). 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. 7 Book value is used insead of he marke value in cerain cases because he base for calculaing marke value is insufficien. 23

28

29 RKET BALANCE OF PAYMENTS AND FINANCIAL MA REPORT 2015 All officiell saisik finns på: Saisikservice: fn All official saisics can be found a: Saisics service, phone Balance of paymens 2014

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