Current account surplus continued to decrease in December

Current account

The current account surplus amounted to only EUR 0.3 bn in December 2008. The surplus for 2008 as a whole was EUR 4.7 bn, compared to EUR 7.3 bn in 2007. The main reason for the drop in the current account surplus was a notable weakening in the trade account.

In BOP terms, there was a EUR 0.3 bn surplus on goods in December, compared to EUR 0.4 a year earlier.

Financial account and international investment position

As in previous months, capital inflows exceeded outflows in December. There were net inflows of EUR 2.4 bn in direct investment and EUR 2.5 bn in portfolio investment. Other investments (loans, deposits and trade credits) resulted in a net capital outflow of EUR 3.2 bn. The net capital inflow into Finland arising from derivative contracts has been higher than usual in recent months.

The 12-month moving total of portfolio assets has fallen since the end of 2007, except in a few exceptional months. In recent months, capital has been repatriated to the extent that the total investment outflow for 2008 has turned negative. This reflected sales of foreign securities by employment pension funds. Except for recent months, portfolio liabilities have moved in line with portfolio assets. The 12-month moving total of portfolio liabilities turned positive in December 2008. The central government increased foreign borrowing in the latter part of the year.

Finnish residents’ external liabilities exceeded their external assets by EUR 7.8 bn at the end of December. Having started in late 2007, growth in the net international investment position is attributable to a fall in the market value of domestic listed companies, which has reduced the value of nonresidents’ holdings in Finnish companies. In the past few months, gross foreign debt has started to increase again, due eg to the central government’s increased foreign borrowing.

Excluding equity items, Finnish residents’ external liabilities exceeded their external assets by EUR 17.5 bn at the end of December. Finland’s net international investment position excluding equity items turned negative already in August 2008, after having been positive for over 5 years.