The deficit on Iceland’s current account in the third quarter of 2005 amounted to 41.3 billion kr. according to preliminary figures from the Central Bank. Over the corresponding period in 2004, the deficit was 12.7 b.kr. In the first three quarters of the year the current account deficit was 106.3 b.kr., compared with 49.4 b.kr. in the corresponding period in 2004. Measured at fixed exchange rates , exports of goods and services in the first nine months of 2005 increased by 8.3% year-on-year, and imports by 33.6%. The deficit on the merchandise account was 70.6 b.kr. and on the service account 22.3 b.kr. over the first three quarters of the year. The income account (compensation of employees, interest and investment income) recorded a deficit of 12.3 b.kr., as against 16.8 b.kr. in the first nine months of 2004. This improvement is explained by increased income from foreign direct investment by residents, which outpaced greater foreign debt service. Current transfers, largely consisting of government contributions to international agencies and foreign aid, rose somewhat year-on-year to 1.1 b.kr.
Balance of payments in b.kr.
July
- Sept.
January-
September
2004
2005
2004
2005
Current Account
-12.7
-41.3
-49.4
-106.3
Exports of goods and services
89.9
82.4
237.9
233.1
Imports of goods and services
-96.4
-119.8
-269.6
-325.9
Income and current transfer, net
-6.2
-3.9
-17.7
-13.4
Capital and Financial Account
20.7
20.9
78.9
140.8
Financial account excl. reserves
23.9
32.8
92.7
150.3
External assets, net
-143.6
-170.0
-301.2
-689.8
External debt, net
167.5
203.1
393.9
840.1
Reserve assets (- increase)
-3.2
-11.8
-13.6
-8.4
Net errors and omissions
-7.9
20.5
-29.4
-34.5
Large-scale capital movements took place in the first three quarters of 2005, with a net capital inflow of 140.8 b.kr., largely explained by Icelandic banks’ bond issues abroad and corporate borrowing to fund foreign investments. Direct foreign investment by residents amounted to 211.2 b.kr. over the first nine months of the year and outflows in connection with foreign portfolio investment by residents 84.8 b.kr. A large outflow also took place in connection with other financial assets abroad, mostly involving overseas deposits and lending by domestic banks. The Central Bank’s foreign reserves amounted to 70.7 b.kr. at the end of September and had increased by 8.4 b.kr. since the beginning of the year.
Iceland’s international investment position was negative by 859 b.kr. at the end of September 2005. Foreign assets amounted to 1,685 b.kr. and foreign liabilities to 2,543 b.kr. Detailed information on the balance of payments and external position in 2005 is presented in the attached tables, along with revised statistics for previous years. The service account was revised for 2004 and previous years in accordance with the results of a survey of software exports which has been published on the Central Bank’s website. Reinvested income from foreign direct investment, and income and current transfer statistics, were revised to incorporate new data on profits of foreign associated companies, which had been overestimated in 2004.
On Monday December 5, 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 external debt will also be published in accordance with the IMF’s Special Data Dissemination Standard, together with metadata for the balance of payments and external position (available in English shortly).
For further information contact Sveinn E. Sigurðsson, Director of the Statistics Department of the Central Bank of Iceland, or Jakob Gunnarsson, Division Chief at the Statistics Department, tel. (+354) 569-9600.
No. 37/2005
December 1, 2005