Current account turned negative in March

Current account turned negative in March

The current account posted a deficit of over EUR 0.3 bn in March 2011. A year earlier the current account deficit totalled EUR 0.2 bn. In BOP terms, the trade account posted a deficit of almost EUR 0.2 bn in March, the same as a year earlier. In the first quarter of 2011, the value of exports of goods increased by 31% compared with the first quarter of 2010, whereas the value of imports of goods increased by 28%. Finland’s exports of goods to non-euro area countries, such as Russia, Sweden and the United States, increased substantially in the first quarter of 2011. Growth in imports of goods has been more broad based, but is still largely concentrated on EU but also on Russia and Norway.

The income account was almost in balance in March 2011 owing to outward dividend payments on portfolio investment. Outward dividend payments on portfolio investment usually occur in April and May.

Finnish residents’ external assets exceeded external liabilities

At the end of March 2011, Finnish residents’ external (foreign) assets exceeded external liabilities by over EUR 12 bn. External assets totalled EUR 548 bn, and external liabilities were EUR 536 bn. Finnish residents’ external assets have increased by over EUR 100 bn from end-2009 to end-March 2011. The largest growth, almost EUR 90 bn, was recorded by monetary financial institutions (MFIs) and employment pension institutions.

However, when equity items are excluded, Finnish residents’ external liabilities exceed external assets. At end-March 2011 the net international investment position excluding equity items was a negative EUR 50 bn. From end-2009 to end-March 2011, Finland’s negative position excluding equity items has grown by over EUR 14 bn. The majority of the growth is due to increased government borrowing.

Investment in GIIPS countries by key Finnish
investor sectors 2010/II-2011/I

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Finnish residents repatriated capital from foreign portfolio investment in the first quarter of 2011

Finnish residents’ foreign portfolio investment assets decreased by EUR 2.8 bn, while portfolio investment liabilities increased by EUR 1.3 bn in the first quarter of 2011.

Finnish residents reduced their holdings of foreign debt securities but invested more in fund shares. Investment in fund shares increased by EUR 1.8 bn in the first quarter of 2011. Of the domestic investor sectors, employment pension institutions increased their foreign portfolio investment most, by about EUR 1.6 bn, whereas MFIs and the central government reduced their investments by about EUR 4.7 bn.

Foreign investors increased their holdings of debt securities issued by banks, the sales of which abroad totalled EUR 2.9 bn. In contrast, foreign investors reduced their holdings of Finnish shares by about EUR 0.7 bn in the first quarter of 2011. Finnish non-financial corporations’ portfolio investment liabilities declined by about EUR 1.3 bn in the first quarter of 2011. The central government’s foreign portfolio investment liabilities declined by EUR 0.8 bn. Of the domestic sectors, only the MFIs recorded an increase in foreign portfolio investment liabilities in the first quarter of 2011.