Archive:European Neighbourhood Policy - East - balance of payments statistics

Data extracted in May 2022.

Planned article update: May 2023.

Highlights

Ukraine was the only European Neighbourhood Policy-East country that had a surplus on its current account in 2020, amounting to 3.4% of GDP. Georgia had the highest deficit, with 12.3 % of GDP. In the EU, there was a surplus of 2.4 % of GDP.

Azerbaijan was the only European Neighbourhood Policy-East country to have a surplus on its trade in goods in 2020, with €2.2 billion; in contrast, it was also the only one to have a deficit in the trade in services, by €2.5 billion.

Current account, net balance, 2010-2020

Azerbaijan: 2010-2012: based on the IMF's Balance of Payments Manual - 5th edition (BPM5). 2013-2020: excluding reserve assets.
Belarus: 2010-2011: data converted from US dollars to euro using annual average exchange rates
Moldova: Data converted from US dollars to euro using annual average exchange rates.
Ukraine: 2018-2020: provisional. Since 2014, data for Ukraine generally exclude the illegally annexed Autonomous Republic of Crimea and the City of Sevastopol and the territories which are not under control of the Ukrainian government.
Source: Eurostat (online data code: bop_gdp6_q, nama_10_gdp, enpe_bop_c6_a and enpe_nama_10_gdp)

This article is part of an online publication; it presents information on a range of economic statistics for the European Union (EU) and the six countries that together form the European Neighbourhood Policy-East (ENP-East) region, namely, Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine. Data shown for Georgia exclude the regions of Abkhazia and South Ossetia over which Georgia does not exercise control and the data managed by the National Bureau of Statistics of the Republic of Moldova does not include data from Transnistria over which the government of the Republic of Moldova does not exercise control. Since 2014, data for Ukraine generally exclude the illegally annexed Autonomous Republic of Crimea and the City of Sevastopol and the territories which are not under control of the Ukrainian government. Data from Belarus were collected in 2021 and validated in January 2022, before the suspension of data collection from Belarus as of March 2022.

The article presents, among others, statistics on the current and capital account from the balance of payments, with a separate section on the foreign direct investment (FDI) part of the financial account.

The balance of the current and capital accounts determines the exposure of an economy to the rest of the world, whereas the financial account explains how this is financed. The balance of the current and capital accounts should equal the net position of the financial account, any difference being recorded as net errors and omissions.

The section on the financial account focuses in particular on the foreign direct investments. A separate article on international trade in goods focuses on another key component of the current account.

Full article

Current account

The current account of the balance of payments represents total transactions with the rest of the world concerning merchandise trade, services, factor income and other current transfers. It is normal for countries that are very fast growing to run negative balances, which represent borrowing from the rest of the world. Developed countries often run surpluses, which represent building up assets in the rest of the world. A balance of payments deficit that is large compared with the country’s GDP can lead to financial difficulties.

In the ENP-East countries over the period 2010-2020, three countries ran reducing current account deficits. Hence, for Armenia the deficit was 13.6 % of GDP in 2010 and 3.8 % in 2020; in Belarus it was 14.3 % in 2010 and 0.4 % in 2020; in Georgia, the deficit was reduced from 9.8 % in 2010 to 5.5 % in 2019, but increased again to 12.3 % in 2020. Ukraine’s deficit was 2.1 % of GDP in 2010, increasing to 8.7 % in 2013. The current account then improved to a surplus of 5.5 % in 2015, before declining again to a deficit of 4.9 % in 2018 and rebounding once more to a surplus of 3.4 % in 2020. In Moldova, the balance of payments deficit increased from 6.9 % in 2010 to 7.5 % in 2020, having been reduced to 3.6 % in 2016.

Azerbaijan is the outlier: its surplus was 28.4 % of GDP in 2010, declining to a deficit of 3.6 % in 2016 with the fall in the global oil price, then rising again to a surplus of 12.8 % in 2018 and falling to a deficit of 0.5 % in 2020. Hydrocarbon exporting countries often run external payments surpluses when prices are high as a means of limiting the rise in value of their currencies and so protecting their other economic activities from becoming uncompetitive internationally. The EU’s balance of payments was in surplus by 0.6 % of GDP in 2010, rising to a maximum surplus of 3.2 % in 2016, then declining to 2.4 % of GDP in 2020.

Figure 1: Current account, net balance, 2010-2020
(% of GDP)
Source: Eurostat (bop_gdp6_q), (enpe_bop_c6_a) and (enpe_nama_10_gdp)

Table 1 provides a more detailed view of the development of the current accounts of the ENP-East countries over the decade 2010-2020, measured in € millions. All six countries registered a decrease in 2020 compared to the previous year in both credits and debits. The effects of the Covid-19 pandemic on economic activity levels and on trade might have contributed to this contraction, together with the general frictions in trade in connection with the US-China and US-EU trade disputes.

Together, the current account credits of the six ENP-East countries amounted to almost €138 million in 2020. This corresponded to 3.7 % of the credits of the EU, which stood at €3 743 billion. By far the highest credits among these countries were recorded by Ukraine, with €68.8 billion, down by 9 % compared to 2019. Thereafter followed Belarus with €35.4 billion, a decline by 14 % compared to the year before. The sharpest decreases in current account credits between 2019 to 2020 were seen by Azerbaijan, Georgia and Armenia, each with falls of almost one third: Azerbaijan by -32 % to €16.0 billion; Georgia by -31 % to €7.7 billion and Armenia by -29 % to €4.9 billion. The current account credits of Moldova fell by 8 % to €5.0 billion.

On the debit side, the ENP-East countries together accumulated current account debits of around €136 billion in 2020; however, exact 2020 data for Ukraine are missing. This would correspond to 4.0 % of the EU’s €3 427 billion current account debits. The highest debits were also recorded by Ukraine with €79.3 billion (2019 data), just like the credits. Thereafter followed, in 2020, Belarus with €35.6 billion (-15 % compared to 2019), Azerbaijan with €16.2 billion (-17 %), Georgia with €9.4 billion (-21 %), Moldova with €5.8 billion (-10 %) and Armenia with €5.3 billion (-32 %).

On balance, Ukraine was the only one of the ENP-East countries to report a surplus in its current account balance for 2020. However, it should be noted that accurate debit data are not available for Ukraine for 2020 yet. The reported surplus amounted to €4.6 billion, following deficits each year in the period 2010-2019 (with the exception of a surplus in 2015). The largest deficit in 2020 was recorded by Georgia with -€1.7 billion. The other ENP-East countries also recorded deficits on their current account balances in 2020, albeit more moderate ones: Moldova -€783 million, Armenia -€419 million, Belarus -€224 million and Azerbaijan -€199 million.

Table 1: Current account, 2010-2020
(€ million)
Source: Eurostat (bop_eu6_q) and (enpe_bop_c6_a)

Table 2 provides details of the different components that makes up the current account: trade in goods; trade in services; primary income; and secondary income. The trade part of the current accounts consists of the values of exports of goods (credits) and imports of goods (debits). The service part correspondingly consists of the values of exports of services (i.e., services performed by the country’s companies in other countries/economies) and imports of services (i.e., services performed by companies from other countries in the accounting country). Primary income covers wages and salaries to non-resident employees and income from investments in other countries. Secondary income covers all other transfers that are not capital transfers, e.g., official development aid in the form of grants, special purpose funding or general budget support.

As shown in Table 1, Ukraine was the only ENP-East country recording a current account surplus in 2020. This surplus of €4.6 billion reflected that the surpluses for services (€3.9 billion) as well as for primary (€3.1 billion) and secondary income (€3.6 billion) more than outweighed the deficit for goods (-€5.9 billion).

In sharp contrast stands Azerbaijan with the smallest deficit among the ENP-East countries in 2020. As the only one among these countries, Azerbaijan recorded a surplus on trade in goods of €2.2 billion, buoyed by the exports of raw oil, natural gas and other petroleum products. This was countered by a deficit of €2.5 billion for the services account, the only deficit for this component among the ENP-East countries, which included support services for the extraction, refinement and transport of the petroleum products. The primary income deficit (-€0.4 billion) was more than balanced out by the secondary income surplus (€0.5 billion); in total, these components summed up to the overall current account deficit of - €0.2 billion.

In Georgia, Moldova and Armenia, the largest component leading to a current account deficit was a deficit in the goods account: in Georgia by -€2.8 billion, in Moldova by -€2.7 billion and in Armenia by -€1.2 billion. For each of these three countries, the current account deficit was moderated by a surplus for the secondary income: in Georgia by €1.6 billion, in Moldova by €1.3 and in Armenia by €0.9 billion. For Belarus, the current account deficit was accumulated in a very different order: deficits in the goods account of -€1.8 billion and in the primary income of -€2.3 billion was almost balanced out by a services account surplus of €3.5 billion.

In comparison, the current account surplus of the EU in 2020 was €315.9 billion; the main part of this consisted of a surplus in goods trade of €332.4 billion, with surpluses also recorded for services (€32.7 billion) and for primary income (€15.0 billion) but a substantial deficit for the secondary income (-€64.2 billion).

Table 2: Main components of the current account balance, 2020
(€ million)
Source: Eurostat (bop_eu6_q) and (enpe_bop_c6_a)

Figure 2 provides a view of how much these different components of the current account contributed to the GDP of each country. The deficit for trade in goods was the largest negative component relative to GDP (% of GDP) for four of the six ENP-East countries, and the second most negative for a fifth country. For Moldova, the trade in goods deficit corresponded to -26.0 % of GDP in 2020, out of an overall current account deficit of -7.5 % of GDP. Thereafter came Georgia with a trade in goods deficit of -19.9 % of the total current account deficit of -12.3 %, Armenia with -10.7 % (of the total -3.8 %) and Ukraine with -4.4 % (of a total current account "surplus" of 3.4 % of GDP). The trade in goods had a negative impact also for Belarus, representing a deficit of -3.3 %, although the deficit for the primary income (-4.4 %) had a larger impact on the overall current account deficit, which stood at -0.4 % of GDP in 2020.

In contrast, secondary income was the largest positive contribution to the current account balance in Moldova (+12.0 % of GDP), Georgia (+11.3 %) and Armenia (+7.7 %) in 2020, while trade in services provided the largest positive contribution for Belarus (+6.5 %) and Ukraine (+2.8 %).

The structure of the current account of Azerbaijan was quite different from those of the other ENP-East countries. Trade in goods contributed a "surplus" of +5.9 % of GDP to the current account, while trade in services contributed a "deficit" of -6.7 % of GDP. The primary income deficit (-1.1 % of GDP) was outweighed by the surplus in the secondary income (+1.3 % of GDP). Overall, this summed up to a current account deficit corresponding to -0.5 % of GDP.

In comparison, the EU’s current account balance stood at a surplus of +2.4 % of GDP in 2020, with the main contributing component being trade in goods at +2.5 % of GDP. There were also small surpluses for trade in services (+0.2 %) and primary income (+0.1 %), but also a minor deficit for secondary income (-0.5 % of GDP).

Figure 2: Main components of the current account balance, 2020
(% of GDP)
Source: Eurostat (bop_eu6_q), (nama_10_gdp), (enpe_bop_c6_a) and (enpe_nama_10_gdp)

Capital account

Table 3 provides an overview over the capital account balance of the ENP-East countries and the EU over the decade from 2010 to 2020. Generally, the capital account balances for these countries have tended to be moderately positive during the decade, with surpluses mostly at less than €100 million in any particular year. The main exception was Ukraine, which recorded capital account surpluses of €141.6 million in 2010, €302.5 million in 2014 and €411.1 million in 2015; against this stood a deficit of -€45.2 million in 2013 and slight deficits of -€3.5 million in 2017 and - €2.6 million in 2020. Georgia had a capital account surplus of €149.4 million in 2010, falling to just over €100 million in the subsequent years: €104.5 million in 2011, €102.4 million in 2012 and €100.2 million in 2013. Moldova recorded a capital account surplus in excess of €100 million in 2014, at €110.9 million, but increasing deficits from -€16.1 million in 2016 to -€57.6 million in 2020. Azerbaijan also recorded negative capital account balances in the periods 2013-2016 and 2019-2020, with the highest deficit at -€39.6 million in 2015.

The capital account of the EU traditionally displays a deficit, resulting from considerable net capital transfers to the rest of the world. From 2010 to 2016, this deficit fluctuated between -€9.4 billion (2013) and -€20.3 billion (2012). The deficit increased rapidly in 2017 and 2018, peaking at - €59.1 billion in 2018, before shrinking again in 2019 and 2020 to end the decade at -€24.1 billion in 2020.

Table 3: Capital account balance, 2010-2020
(€ million)
Source: Eurostat (bop_eu6_q) and (enpe_bop_c6_a)

Between 2010 and 2020, the capital account balances of the ENP-East countries fluctuated somewhat, but mainly only within the narrow range between 0 % and 1 % of GDP. Only Armenia in 2010 and 2012 at 1.1 % and 1.0 % of GDP, respectively, Georgia in 2010 and 2011 at 1.6 % and 1.0 % of GDP, respectively, and Moldova in 2013 and 2014 at 1.1 % and 1.5 % of GDP, respectively, recorded larger capital account surpluses relative to GDP. At the other end of the scale, Moldova recorded negative balances from -0.2 % of GDP in 2016, rising to -0.6 % of GDP in 2020. Azerbaijan recorded negative capital account balances of -0.1 % in both 2015 and 2016.

Relative to GDP, despite the EU’s considerable net capital transfers to the rest of the world 2010-2020, the capital account deficits only ranged between -0.1 % and -0.4 % (2018) when measured as percentage of GDP.

Figure 3: Capital account balance, 2010-2020
(% of GDP)
Source: Eurostat (bop_eu6_q), (nama_10_gdp), (enpe_bop_c6_a) and (enpe_nama_10_gdp)

Financial account, including foreign direct investment (FDI)

The balance of the financial account is interpreted as net lending to the rest of the world when positive, and net borrowing from the rest of the world when negative. Three types of investment (direct investment (or FDI), portfolio investment and other investment) consolidate the financial account along with (net) financial derivatives and reserve assets.

The financial account balance may vary considerably from year to year, dependent on specific projects and financing needs. Figure 4 presents the financial account balance of the six ENP-East countries and the EU for 2010, 2015 and 2020.

The financial account deficit of Armenia decreased steadily from -13.8 % of GDP in 2010 to -5.4 % in 2015 and -4.0 % in 2020. In contrast, the financial account balance of Azerbaijan fell from a surplus of 26.6 % of GDP in 2010 to a surplus of only 1.0 % of GDP in 2015, before rising again to 5.9 % in 2020. Belarus consolidated in the opposite direction, reducing its deficit of -13.1 % in 2010 to -0.7 % in 2015, before increasing to -1.6 % in 2020. The negative balance in Georgia remained roughly at the same level throughout, from -8.8 % in 2010 falling to -12.6 % in 2015 before stabilising at -12.1 % in 2020. Similarly, although at a more moderate level, Moldova saw its financial account deficit increase from -5.8 % in 2010 to -8.7 % in 2015 before falling back to -4.6 % in 2020. Ukraine managed to turn its financial account deficit of -1.0 % of GDP in 2010 into a surplus of 3.9 % in 2015 before seeing it slump to a renewed deficit of -2.5 % in 2020.

In the EU, the financial account surplus shrunk from 2.1 % of GDP in 2015 to 0.8 % in 2020; 2010 data are not available.

Figure 4: Financial account balance, 2010, 2015 and 2020
(% of GDP)
Source: Eurostat (bop_eu6_q), (nama_10_gdp), (enpe_bop_c6_a) and (enpe_nama_10_gdp)

Foreign direct investment (FDI) represents a lasting interest in an enterprise operating in another economy and implies the existence of a long-term relationship between the direct investor and the recipient enterprise. It forms a part of the financial account of the balance of payments. Inflows represent flows of investment into the economy; outflows represent flows of investment by the economy in the rest of the world. Negative values represent disinvestment. Countries that attract considerable inward investment are often themselves investors in other countries. Inward inflows, outward flows and the foreign direct investment balance are shown in Table 4. Since FDI can represent investment in large projects, it can vary greatly from one year to another.

Ukraine was the ENP-East country that received the largest absolute flows of inward FDI (€35.6 billion) over the period 2010-2020, more than twice as high as in Belarus, which had €15.5 billion of inward direct investment over the period, ahead of Georgia, with €12.1 billion of inward FDI. Armenia (€2.9 billion) and Moldova (€2.4 billion) received foreign investment at a much lower level. Data are not available for Azerbaijan.

As a proportion of GDP, Georgia attracted most inward FDI in 2020 at 3.7 % (inward FDI: €513 million; GDP: €13.9 billion), with Belarus at 2.3 % (inward FDI: €1 234 million; GDP: €53.0 billion) and Moldova at 1.3 % (inward FDI: €138 million; GDP: €10.5 billion). Inward investment flows were equivalent to 0.4 % of GDP in Armenia (inward FDI: €41 million; GDP: €11.1 billion) and there was slight net disinvestment in Ukraine (inward FDI: ‑€31 million; GDP: €136.2 billion) in 2020. In the EU, inward FDI was 2.3 % of GDP in 2020 (inward FDI: €301.8 billion; GDP:13 403 € billion).

Outward FDI by ENP-East countries was, as could be expected, much lower than inward FDI over the period 2010-2020. Georgia’s outward investment over this period (€2.3 billion) represented nearly 19 % of its inward flow (€12.1 billion); Moldova (outward: €0.2 billion; inward: €2.4 billion) and Armenia (outward: €0.2 billion; inward: €2.9 billion), 8 %; Ukraine 7 % (outward: €2.7 billion; inward: €35.6 billion) and Belarus 6 % (outward: €0.9 billion; inward: €15.5 billion).

Over the period 2010-2020, EU’s outward FDI (€3 350 billion) was equivalent to 111 % of its inward flow (€3 009 billion). Note that there was a methodological change in the EU data between 2012 and 2013.

Table 4: Foreign direct investment, 2010-2020
(€ million)
Source: Eurostat (bop_fdi_flow_r2) and (bop_fdi6_flow) and Eurostat data collection

Source data for tables and graphs

European Neighbourhood Policy — East countries — balance of payments: tables and figures

Data sources

The data for ENP-East countries are supplied by and under the responsibility of the national statistical authorities of each country on a voluntary basis. The data result from an annual data collection cycle that has been established by Eurostat. These statistics are available free-of-charge on Eurostat’s website, together with a range of additional indicators for ENP-East countries covering most socio-economic topics.

The balance of payments is a statistical statement that summarises the transactions of an economy with the rest of the world. More precisely, it records all economic transactions of an economy's residents with non-residents, where a change of ownership occurs. In this context a resident is a person or company that is registered in a country for more than one year.

Transactions are organised in two different accounts: on one hand the current and capital accounts and on the other hand the financial account. The sum of balances of these accounts should, in principle, be zero, as for each economic transaction in the current and capital accounts there should be an equivalent transaction in the financial account.

Data are generally presented in regard to the latest compilation standard of the IMF’s Balance of payments manual — sixth edition (BPM6).

The current account of the balance of payments provides information not only on international trade in goods (traditionally the largest category), but also on international transactions in services, primary and secondary income. For all these transactions, the balance of payments registers the value of credits (exports) and debits (imports). A positive balance — a current account surplus — shows that an economy is earning more from its international export transactions than its spending abroad on import transactions with other economies, and is therefore a net creditor (net exporter) towards the rest of the world.

The capital account of the balance of payments provides information on the acquisition of non-financial assets by residents in the rest of the world, or by non-residents in the compiling economy, for example investment in real estate. It also includes capital transfers by general government, financial corporations, non-financial corporations, households and non-profit organisations (also specifically covering debt forgiveness).

The financial account of the balance of payments covers all transactions associated with changes of ownership in financial assets and liabilities of an economy with the rest of the world. Direct investment implies that a resident direct investor makes an investment that gives control or a significant degree of influence on the management of an enterprise in another economy.

Tables in this article use the following notation:

Value in italics	data value is forecasted, provisional or estimated and is therefore likely to change;
:	not available, confidential or unreliable value;
–	not applicable.

Context

Indicators derived from national accounts provide a picture of the economic situation; they are widely used for analysis and forecasting, as well as policymaking. The global financial and economic crisis reinforced the need to develop more robust national accounts and government statistics in order to improve the surveillance and monitoring of financial systems and the impact that the crisis may have on economies, while also providing additional valuable information to support economic initiatives geared towards recovery. The use of internationally accepted concepts and definitions permits an analysis of different economies, such as the interdependencies between the economies of the EU Member States, or a comparison between the EU and non-member countries.

Within the EU, multilateral economic surveillance was introduced through the stability and growth pact, which provides for the coordination of fiscal policies. Economic statistics have become one of the cornerstones of global, regional and national governance, for example, to analyse national economies during the global financial and economic crisis or to put in place EU initiatives such as the European semester, designed to promote discussions concerning economic and budgetary priorities.

On 2 July 2021, the European Commission and the EU High Representative for Foreign Affairs and Security Policy presented the Eastern Partnership: a Renewed Agenda for cooperation with the EU’s Eastern partners. This agenda is based on the five long-term objectives, with resilience at its core, as defined for the future of the Eastern Partnership in the Joint Communication Eastern Partnership policy beyond 2020: Reinforcing Resilience – an Eastern Partnership that delivers for all in March 2020. It is further elaborated in the Joint Staff Working Document Recovery, resilience and reform: post 2020 Eastern Partnership priorities. It will be underpinned by an Economic and Investment plan. The Joint Declaration of the Eastern Partnership Summit ‘Recovery, Resilience and Reform’ of 15 December 2021 reaffirms strong commitment to a strategic, ambitious and forward-looking Eastern Partnership.

In cooperation with its ENP partners, Eurostat has the responsibility ‘to promote and implement the use of European and internationally recognised standards and methodology for the production of statistics, necessary for developing and monitoring policy achievements in all policy areas’. Eurostat undertakes the task of coordinating EU efforts to increase the statistical capacity of the ENP countries. Additional information on the policy context of the ENP is provided here.