The Central Bank of Iceland has published on its website the preliminary statistics for the balance of payments in the second quarter of 2009, and for the external position at the end of the quarter. The deficit on the current account totalled 46 b.kr. for the second quarter, which is similar to last quarter. The trade account showed a surplus of over 18 b.kr. and the services account a 7.2 b.kr. surplus. A 69.4 b.kr. deficit was on the income account.
The income account deficit for the first quarter is mostly attributable to the old banks’ unpaid accrued interest and therefore does not generate capital outflows. Accrued expenses of the old banks amounted to 63.5 b.kr. and accrued income 27.8 b.kr.; therefore, their negative efffect on the income account is 35.7 b.kr. The income account deficit without the effect of the old banks is 35.9 b.kr. and the current account deficit 10.3 b.kr
External assets totalled 8,389 b.kr. at the end of the quarter, while external debt totalled 14,343 b.kr. Iceland’s international investment position was therefore negative by 5,954 b.kr. at the end of Q2/2009 and increased by 571 m.kr. from last quarter. The main explanation for that increase is a rise in short-term liabilities due to financing of arrears. Payments in arrears increase short-term liabilities, as they are actually financed by owners of the debt, and are entered as capital inflows in the capital and financial account.
It should be noted that the external debt figures include assets and liabilities of the three commercial banks that have been granted moratoria. Their estimated assets amounted to 5,673 b.kr. and their liabilities 11,020 b.kr.; thus their negative asset position amounted to 5,347 b.kr. at the end of the quarter. Iceland’s international investment position without their effect was therefore negative by 606 b.kr. at the end of Q2/2009.
It appears that FDI reporting to the Central Bank has not been satisfactory in the case of one very large and complex transaction by private parties that occurred in late 2007. The transaction involved a large borrowing by the domestic company; therefore, the influence of that transaction is mainly seen in debt items, both as loans from affiliates and from the foreign investor (parent company). The impact of the transaction on Iceland’s IIP is about 1,000 b.kr. at the end of Q2/2009. Figures have been rewieved back to Q4/2007 according to the latest information about the transaction. It is important to note that this is a debt to the foreign investor (parent company) and affiliates, which are all privately owned by the same conglomerate.
Press release with tables:
Further information can be obtained from Ríkardur Bergstad Ríkardsson of the Statistics and IT Department of the Central Bank of
No. 28/2009
September 3, 2009