Balance of payments in the first quarter of 2007 and the external position

The Central Bank of Iceland will today publish on its website preliminary statistics for the balance of payments in the first quarter of 2007, and for the external position at the end of March.

The deficit on the current account was 28 b.kr. in Q1/2007, which is only half that in the corresponding quarter a year before (57.3 b.kr.). A deficit was shown on all current accounts: goods, services, income and current transfer. The deficit on the goods account was 8.1 b.kr., compared with 31.9 b.kr. in Q1/2006. Specific factors explain part of the narrowing of the current account deficit in Q1/2007, such as aircraft sales and profits on foreign investment. The turnaround in the balance on income reflects residents’ shares in profits on direct foreign investment abroad, which are measured as income and are reinvested at the same time in the companies. A slight increase was shown on the expenditure side of the income account, which is likewise explained by reinvested profit on direct foreign investment in Iceland. However, little new inward investment was made in Iceland during the quarter.

Net financial outflow measured 88.3 b.kr. over Q1/2007. Foreign direct and bond portfolio investment by residents grew considerably from Q4/2006. On the other hand, foreign direct investment in Iceland by non-residents contracted, as did their portfolio investment in marketable securities.

Full press release with table (pdf)

No. 9/2007
June 5, 2007