Current account posts a slight deficit in January 2009

Current account

The current account posted a deficit of EUR 27 million in January 2009. This was largely due to the weaker performance of the goods account, which posted only a slight surplus.¹ In recent years the current account has posted a deficit only in those months when listed companies have distributed dividends to foreign investors.

Financial account and international investment position

Capital flows in January remained inward on net, as in previous months. There was a net inflow of EUR 1.1 billion in direct investment and EUR 4.2 billion in portfolio investment. Other investments (loans, deposits and trade credits) recorded a net capital outflow of EUR 2.0 billion. In central government asset management there were large movements of capital in both assets and liabilities. In respect of derivatives there has been a larger net inflow of capital into Finland in recent months than previously.

In securities-based assets, the 12-month moving total has been declining since the end of 2007 apart from a couple of exceptional months. Recent months have seen a repatriation of capital on such a scale that the outward flow of investment for 2008 as a whole has become negative. This was due to sales of foreign securities by the employment pension funds. In January 2009, capital was once again invested abroad, in the amount of EUR 1 billion.

Apart from recent months, the trend in securities-based liabilities has been similar to the trend in assets. The 12-month moving total in securities-based liabilities became positive in December 2008. Towards the end of 2008, central government increased its level of borrowing from foreign sources. In January , foreign borrowing by Finnish residents continued, with a capital inflow of EUR 5.2 billion.

At the end of January, Finnish residents’ foreign liabilities exceeded their foreign assets by EUR 8.2 billion. The upward trend in net assets that began towards the end of 2007 has been due to a decline in the market value of Finnish listed companies that has lowered the value of their foreign holdings. In the most recent months, the level of gross foreign debt has begun to grow again, partly because of the increase in foreign borrowing by central government.

At the end of January, excluding equity items, Finnish residents’ foreign liabilities exceeded their foreign assets by EUR 15.5 billion. The net international investment position excluding equity items became negative already in August 2008 following a good five years of positive figures.