Fall in balance of payments current account surplus

The balance of payments current account surplus dropped significantly in 1999 to £233 million (€295 million) from £1.173 billion in 1998, according to data released yesterday by the Central Statistics Office (CSO).

The figures follow an overhaul of the CSO's collection and compilation system, which means new data from 1998 onwards are not comparable with the earlier series of balance of payments figures.

The new system is the fruit of four years' preparation and brings the State into line with the requirements of the European Central Bank and the European Commission.

New data on the International Financial Services Centre (IFSC) were included in yesterday's statistics and will now form part of the quarterly figures.

The statistics show that in 1998 and 1999, IFSC enterprises contributed £1.376 billion and £1.008 billion respectively to the current account balance, while there were deficit contributions of £202 million and £774 million from transactions of non-IFSC enterprises and merchandise trade combined.

The figures also show that the State had a very large current account surplus of £10.3 billion with other EU countries in 1999, but a deficit of £10.1 billion with non-EU countries.

As for economic and monetary union (EMU), the State had a surplus of £9.5 billion with other EMU countries, and a deficit of £9.3 billion with non-EMU countries, the difference being accounted for by Britain.

The new, more involved statistics include figures on merchandise, trade, services, income and current transfers.

The direct investment income figures show a large net outflow of £13.5 billion in 1999, "due essentially to the outflow of profits of direct investment enterprises located in Ireland and engaged largely in manufacturing and in financial services, particularly in the IFSC", according to the CSO.

"Sizeable inward flows, however, are also evident and the amounts shown for 1998 (£2 billion) and 1999 (£2.75 billion) cover profits of Irish-owned manufacturing and financial service direct investment enterprises located abroad."

The current account balance for 1998, as derived on the old basis, was a surplus of £563 million, while on the new basis it was £1.17 billion - a difference of £610 million.

This is the only year for which the two figures are available and the CSO has recommended that this difference should not be used to derive estimates under the new methodology for earlier years.

Later this year, the CSO will compile a retrospective series for the main current account aggregates.

The CSO has been working since 1996 on the new compilation methodology and has received significant co-operation from the financial services sector in the IFSC.

In preparing the data, some 2,500 questionnaires were sent to companies in the financial services sector, with approximately 2,000 of those being in the IFSC. A further 500 questionnaires were sent to companies in the manufacturing and non-financial sectors.