State records payments surplus
THE FIRST significant payments surplus since 2003 between Ireland and the rest of the world was recorded in the third quarter of 2010, according to the Balance of International Payments, published yesterday by the Central Statistics Office.
A surplus on the current account of the balance of payments of €255 million was registered. As large deficits were recorded in the first half of the year, the cumulative deficit in the first nine months of the year stood at €2.5 billion.
This, however, is a fraction of the peak deficits in 2008-2009, when full-year imbalances of over €10 billion were recorded.
The current account includes exports and imports of goods and services, income flows on assets held in Ireland by foreigners and on foreign assets owned by Irish residents.
Transfer payments, such as grants from the EU and foreign aid, are the fourth and final component.
The value of Irish exports of goods and services in the third quarter stood at €21.6 billion and $18.7 billion respectively.
A quarter-on-quarter decline in the value of goods exports, of €164 million, was more than offset by an almost €0.5 billion increase in services. As a result, goods and services exports combined reached a record €40.3 billion (see chart).
The Balance of International Payments provide the most detailed figures on Ireland’s large internationally traded services sector.
Computer services, the largest single services export by value, registered a quarter-on-quarter decline in the July-April period. This was more than offset by the other sectors, notably business services, which is the second largest source of services export revenues. Imports of goods and services both fell in the third quarter, reflecting weak Irish demand. This was the major contributory factor in narrowing the overall current account deficit. This continues a trend in evidence since late 2008.
The figures also showed investment income from foreign assets held by Irish residents stood at €15.3 billion in the third quarter, a rise of just over €1.5 billion quarter on quarter. Payments to foreign investors, meanwhile, rose by just under €1.3 billion, to stand at €22.9 billion.
The Balance of Payments is the widest measure of commercial relations with the rest of the world. A current account deficit usually represents an economy suffering a lack of competitiveness and/or over-consuming.
In recent years, focus on countries current account balances has increased as surplus countries, such as Germany, are accused of underconsumption at home, while deficit countries, such as Spain, Portugal and Greece, are accused of overconsumption and failing to become competitive.
In this regard, the narrowing of Ireland’s current account deficit since the recession marks it out from the weak Mediterranean members of the euro zone.