The deficit on Iceland’s current account in the first quarter of 2005 amounted to 30.9 billion kr. according to preliminary figures from the Central Bank. In the first quarter of 2004 the current account deficit was 13.1 b.kr. The merchandise account was in deficit by 11.3 b.kr. and the services account by 12.2 b.kr. The deficit on the income account was 7.2 b.kr. in the first quarter of 2005, compared with 6.7 b.kr. in the same period the preceding year. Measured at fixed exchange rates*, exports of goods and services increased by 4% while imports increased by 28.2% year-on-year.
Capital inflow measured 117.6 b.kr. in Q1/2005. Net foreign borrowing amounted to 196.3 b.kr., mainly in the form of debt securities issued abroad by Icelandic banks. Direct foreign investment in Iceland was 6.6 b.kr. Capital outflows in connection with portfolio investment abroad amounted to 10.3 b.kr., and foreign direct investment by residents 27.9 b.kr. Other investment was 48.5 b.kr., in particular foreign lending by Icelandic banks, which has soared in recent years with an outstanding stock amounting to 340 b.kr. at the end of March. The Central Bank’s foreign reserves amounted to 59.5 b.kr. at the end of March and had decreased by 3.9 b.kr. during the quarter.
Balance of payments in b.kr.
Exports of goods and services
Imports of goods and services
Income and current transfer, net
Capital and Financial Account
Financial account excl. reserves
Reserve assets (- increase)
Iceland’s net international investment position was negative by 804.1 b.kr. at the end of March, just over 114 b.kr. more than at the beginning of the year. The higher negative investment position cannot be fully explained by the current account deficit or price changes, and the figure for errors and omissions is exceptionally large on this occasion.
The volume of Iceland’s capital flows has multiplied over a short time and acquisition of data on it is much more problematic than before. It is probable that inadequate information about the disposition of capital inflows on external investment has produced the exceptionally high figure for errors and omissions in the preliminary balance of payments for the first quarter. However, it should be noted that it corresponds to only a fraction of gross capital flows over the period. Every possible effort will be made to enhance data acquisition, and the errors and omissions figure is likely to diminish as more complete data on foreign exchange transactions are received. Furthermore, it may be rash to draw too firm conclusions from data on capital flows for a single quarter, due to the inevitable lags that occur in acquiring data on them.
Detailed information on the balance of payments and external position is presented in the attached tables, along with revised statistics for previous years. Balance of payments statistics for the period 2002-2004 have been revised. The resulting correction to the balance on income reduced the current account deficit by 2.1 b.kr. in 2003 but increased it by 3.2 b.kr. in 2004. The change is equivalent to 0.3% of GDP for these years.
On Monday June 6, 2005, the Central Bank will publish tables showing the balance of payments and external position on the Statistics page of its website (www.sedlabanki.is). A table showing Iceland’s gross external debt will also be published in accordance with the IMF’s Special Data Dissemination Standard, classified by sectors, maturity and instruments.
For further information contact Jakob Gunnarsson, Division Chief at the Statistics Department of the Central Bank of Iceland, tel. (+354) 569-9600.