05 December 2008

Balance of payments in the third quarter of 2008 and the external position

The deficit on the current account was 109.6 b.kr. in the third quarter of the year, which is considerably lower than in the previous quarter. To a large degree, the change can be traced to the smaller deficit on the income and service accounts, which is offset somewhat by the wider merchandise account deficit. The loss on residents' outward foreign direct investment (reinvestment of profit/loss) was smaller; however, interest expense due to external debt has increased.

Net financial inflow totalled 166.8 b.kr. during the period. Residents' outward foreign direct investment increased by 49 b.kr., while non-residents' inward foreign direct investment contracted by 18.8 b.kr. There was also a considerable contraction in non-residents' portfolio investment in Iceland. Net financial inflow is derived from resident investors' sales of foreign debt instruments and foreign borrowings by the public sector.

The errors and omissions item in the quarterly accounts is rather large, and a review of the financial account for the previous quarters of 2008 resulted in little change to errors and omissions for the balance of payments. There remains the possibility, however, that this item will be reduced as further information is revealed during the preparation of full year balance of payments statement. The Central Bank's experience is that a negative errors and omissions item is most often explained by underestimation of the capital account, although sometimes it is also the case that more detailed information concerning transactions and their timing becomes available later.

Press release with tables (pdf-file)

No. 47/2008
December 5, 2008