Balance of payments

International guidelines

The Norwegian Balance of Payments is presented in accordance with the latest internationally approved guidelines. These are specified in "The Balance of Payments Manual, 6th edition" (BPM6), published by the International Monetary Fund (IMF). The underlying principles and definitions presented there are in full accordance with corresponding international rules for the National Accounts, as laid down in the manual "System of National Accounts 2008" (2008 SNA ), which is published by a number of international organizations jointly, including the United Nations and also the IMF.

EU has prepared its own edition of the National Accounts manual, "European System of Accounts 2010" (ESA 2010), which accommodates special conditions in member countries. Pursuant to the European Economic Area Agreement, Norway is obligated to adhere to this system. The reporting of National Accounts data in accordance with ESA definitions to EUROSTAT, EU's statistical office, has a legal basis, and so is also the case for reporting of the Balance of Payments data. The aim of these agreements is to enhance the overall presentation of Balance of Payments figures for countries in the EEA and to improve the quality of the data by harmonizing the methods of compilation and calculation.

Basic concepts and recording principles

Like National Accounts, Balance of Payments accounts are constructed around three basic concepts: statistical units, economic values and transactions. Briefly, the accounting systems describe transactions between statistical units in which economic values are provided or received in exchange for other economic values. Statistical units are institutional units which make economic decisions on an independent basis and can present complete accounts for their activities. The institutional unit normally coincides with a body corporate, e.g. a limited liability company or legal person. Economic items can either be real resources, i.e. goods and services, or financial items representing various claims and liabilities.

The basic criterion for entering a transaction in the Balance of Payments is that it involves an exchange between a domestic entity (resident) and a foreign entity (non-resident). Residents are institutional units that engage and intend to continue to engage in economic activities and transactions within a country's territory, with one year or more serving as the conventional guideline.

In the Balance of Payments, a transaction should in principle be allocated to the period in which there is a change of ownership of the economic value. Conventionally, it is often said that a change of ownership has taken place when the parties of the transaction register it in their books or accounts. In the case of exports and imports of goods, it is in practice when the goods cross the border, as registered through customs declarations that determines the time of recording the transaction.

All transactions shall be valued at market prices. Market prices are defined as amounts of money that willing buyers pay to acquire something from willing sellers; the exchanges are made between independent parties and on the basis of commercial considerations only. Total exports and total imports shall be recorded at f.o.b. prices¹. On a detailed commodity level, c.i.f. prices (cost-insurance-freight) are used for imports, i.e. including transport and insurance costs up to the border of the importing country. The exchange rate on the transaction date or the average rate for the shortest period applicable shall be used for converting transactions in foreign currencies into the national currency. Stocks of assets and liabilities are to be valued at prices or rates in effect at the time to which the balance sheet relates.

Income and expenditure are defined in the National Accounts and Balance of Payments excluding gains and losses, irrespective of whether they are realised or unrealised. Such items, however, help to explain total balance sheet changes that take place in the course of a period and are registered on the account for revaluation.

Balance of Payments accounts are based on the rules for double entry bookkeeping. All transactions are represented by two entries, a credit and debit entry. Most transactions are those in which economic items are provided or received in exchange for other economic items, entailing that offsetting credit and debit entries will normally be registered. For example, exports of a good will be registered in External Trade Statistics and recorded as a credit entry in the Balance of Payments accounts, whereas the accompanying increase in foreign assets, e.g. in the form of higher foreign exchange reserves, is registered in sources covering the financial account items and recorded as a transaction on the debit side of the Balance of Payments accounts. In other cases when items are given away rather than exchanged, or a recording is one-sided for other reasons, there is only one recording in the data sources. In these cases a counter entry is constructed, in this example in the form of a transfer so that the double entry requirement is satisfied.

Structure and definitional relationships

The Balance of Payments is an integrated part of the National Accounts and is constructed as a mirror image of the institutional sector "Rest of the World" in the National Accounts. In the Balance of Payments, transactions are seen from Norway's point of view, while in the institutional sector accounts they will be seen from the perspective of the rest of the world. A surplus on Norway's current account will in the National Accounts appear as a deficit for the sector "Rest of the World".

The Balance of Payments consists of three main parts: a current account, which shows current transactions with the rest of the world, a capital showing capital transactions, and a financial account, which records investment transactions in the form of purchases and sales of financial instruments.

Overview of the Balance of Payments:

1)            Current account balance

Balance of goods and services

Balance of income and current transfers

2)            Capital transfers to abroad, net

3)            Net lending, current- and capital account

4)            Financial account, assets/liabilities

Direct investment

Portfolio investment

Other investment

Reserve assets

5)            Net lending, financial account

6)            Errors and omissions

Following definitions applies:

Accumulation accounts: current- and capital account and the financial account:

1+ 2 =3

4 assets – 4 liabilities = 5

3 – 5 = 6

Consistent Balance of Payments requires:

 (3) = (5)

The current account comprises, first, exports and imports of goods and services, with the balance of goods and services as a balancing item. In addition, data are provided for compensation of employees, investment income and expenditure as well as current transfers to and from the rest of the world. The balance for this component is net income and current transfers. The total balance of the current account is the sum of the balances of these two components.

The capital and financial account shows how transactions recorded in the current account result in changes in foreign assets and liabilities, and in addition to purchases and sales of financial instruments includes capital transfers. This entails that the balance on the current account must be adjusted for net capital transfers in order to arrive at net lending.

The definitional relationship between the current account and the financial account is that a current account surplus, adjusted for net capital transfers and net acquisitions of patents and copyrights etc, increases net foreign assets (or reduces net liabilities), while a deficit on the current account will reduce net assets (or increase net liabilities).

The financial account also includes transactions that do not have a counter entry in the current account. One example would be a resident who uses funds in a foreign bank account to repay a loan raised abroad.

Total asset transactions less total liability transactions result in net lending. By adjusting net lending for valuation changes and other balance sheet changes not caused by transactions², we arrive at changes in Norway's net foreign assets/liabilities.

Net errors and omissions are derived from net lending from the two accounts, and can be derived from the current account minus the same item derived from the financial accounts. Although the balance of payments accounts are, in principle, balanced, imbalances occur due to imperfections in source data and compilation.

See also Concepts and definitions in national accounts

¹ F.o.b. = free on board, i.e. the value when passing the border of the country of exports.

² Certain types of debt forgiveness and a change in a statistical unit's sectoral classification are examples of balance sheet changes that are not based on transactions.

In addition to the classifications and categories described in the international BoP and National Accounts manuals, it may be mentioned that both the Norwegian BoP and National Accounts make use of the product classification CPA (Classification of Products by Activity) of the EU and sectors classified in ESA 2010. For more information of sectors, please see ssb.no.

Name: Balance of payments
Topic: External economy

Division for National Accounts

Balance of Payments statistics are held at national level.

Quarterly statistics. The first version for quarter k t is published after k+60 days, followed by revisions in the following quarterly publications. The final version is published in August/September year t+2.

Reporting to Eurostat, the International Monetary Fund (IMF), Organization for Economic Co-orporation and Development (OECD) and Bank for International Settlement (BIS).

Microdata are based on different sources.

The purpose of the Balance of Payments statistics is to supply reliable information on residents' of Norway economic transactions with non-residents. The statistics are an integrated part of the National Accounts using the same principles and definitions. The financial transactions can be seen in relation to the positions presented in international investment position.  

The statistics is set to meet the international requirements given in the Balance of Payments and International Investment Position Manual (BPM). The international guidelines in BPM are revised during the last several years, with the latest update published in 2009 by the International Monetary Fund (IMF). The sixth edition of the manual, BPM6, is the current version and is implemented in the Norwegian Balance of Payments in December 2014. Back data based on the guidelines from BPM6 is implemented in both the current- and capital account and the financial account. The current- and capital account has time series going back to 1981, while the financial account has time series going back to 2005.   

Balance of Payments statistics has been published by Statistics Norway ever since the first post-war years.

The main users are international organizations, IMF, Eurostat, OECD and BIS. The Balance of Payments is used by market analytics within finance and the business sector in general, and by governmental agencies for economic policy purposes.

Used in the National Accounts, Balance of Payments statistics give an exact mirror image of the sector Rest of The World in the national Accounts.

No external users have access to the statistics and analyses before they are published and accessible simultaneously for all users on ssb.no at 08.00 am. Prior to this, a minimum of three months' advance notice is given in the Statistics Release Calendar. This is one of Statistics Norway’s key principles for ensuring that all users are treated equally.

Full integration with the National Accounts makes the Norwegian BoP data consistent with both the exports and the imports figures and financial figures for the Rest of the World Account of the National Accounts.

The BoP has a somewhat broader scope compared to the External Trade in Goods statistics. The main deviations are that BoP includes as exports goods delivered to non-resident carriers in Norwegian ports, goods other than oil and gas exported directly from the Norwegian continental shelf, imports of fuel to Norwegian carriers in foreign ports, and direct imports of goods to the Norwegian continental shelf. In addition the BoP converts exports and imports of certain types of goods as registered in the external trade statistics into exports and imports of services.

The BoP financial account has the same principle and detailing level as International Investment Position (IIP). IIP shows the positions of assets and liabilities abroad each quarter. The positions together with the transactions, revaluations and other volume changes give a consistent picture of the financial part of the external sector.

In the BoP statistics there is a classification on functional categories, one of them being direct investment. There is in addition a separate annual statistics on Direct investment published by Statistics Norway. The two statistics follows different methods and will therefore show different figures.

Not relevant

EU-regulations incorporated in the EEA-agreement define the scope of the statistics. Following regulations apply to the BoP-statistics:

• REGULATION (EC) No 184/2005 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 12 January 2005 on Community statistics concerning balance of payments, international trade in services and foreign direct investment
• COMMISSION REGULATION (EC) No 1055/2008 of 27 October 2008 implementing Regulation (EC) No 184/2005 of the European Parliament and of the Council, as regards quality criteria and quality reporting for balance of payments statistics
• COMMISSION REGULATION (EU) No 1227/2010 of 20 December 2010 amending Regulation (EC) No 1055/2008 implementing Regulation (EC) No 184/2005 of the European Parliament and of the Council, as regards quality criteria and quality reporting for balance of payments statistics
• COMMISSION REGULATION (EU) No 555/2012 of 22 June 2012 amending Regulation (EC) No 184/2005 of the European Parliament and of the Council on Community statistics concerning balance of payments, international trade in services and foreign direct investment, as regards the update of data requirements and definitions
• REGULATION (EC) No 716/2007 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 20 June 2007 on Community statistics on the structure and activity of foreign affiliates

The scope of the Balance of Payments is defined in international guidelines in the Balance of Payments and International Investment Position Manual (BPM6), System of National Accounts (2008 SNA, published by the UN, OECD, IMF, World Bank and the European Commission) and the European System of National and Regional Accounts (ESA 2010).

Like National Accounts, Balance of Payments accounts are constructed around three basic concepts: statistical units, economic values and transactions. Briefly, the accounting systems describe transactions between statistical units in which economic values are provided or received in exchange for other economic values. The Balance of Payments shall in principle include all transactions between unit’s resident of the Norwegian economic territory and non-resident units. See below for more about the sample that’s behind the BoP statistics. 

The delineation of the economy towards the rest of the world is based on the concept of resident units. A unit is a resident unit when it has a centre of economic interest in the economic territory in question, i.e. when it is engaged in economic activity in a territory for a long period of time (at least one year).

The Norwegian economic territory includes mainland Norway together with the Norwegian part of the Continental Shelf, Svalbard and Jan Mayen with Bjørnøya.

The Balance of Payments is based on data collected by other divisions in Statistics Norway.

The main sources for the current- and capital account;

• External trade in goods   
• Petroleum Statistics
• Sample survey, non-financial enterprises,non-financial corporations and financial institutions not under supervision
• Structural Business Statistics, Ocean Transport
• Annual accounting statistics for the general government.
• Quarterly accounting statistics for financial corporations under supervision
• Travel survey

The main sources for the financial account;

• Quarterly accounting statistics for financial corporations under supervision. Positions are reported and some transactions (equity, other debt securities and loans) and some revaluations (exchange rate changes and other price changes) quarterly and annually.
• Quarterly accounting statistics for non-financial corporations and financial institutions not under supervision. Positions and revaluations are reported quarterly and annually. 
• Annual accounting statistics for the general government. Positions and revaluations (exchange rate changes and other price changes) are reported.
• Quarterly data from the Norwegian Central Securities Depository (VPS) and data from a separate survey on mutual funds. Positions and transactions are reported.

Data collected for non-financial corporations and mutual funds are based on sample surveys. See each survey for more information on sampling, for example sample survey and how to choose the sample. For areas with incomplete statistical coverage, it is necessary to do estimations or use supplementary sources such as tax returns.

All major Norwegian financial and non-financial enterprises are covered in the BoP-statistics.

Data are collected through different surveys in Statistics Norway and put together to create the Balance of payments.

Estimations: 

For most of the BoP items the figures used are as shown in the primary sources, as mentioned in the “Data source and sampling” section. Others are derived through estimations of which the most important are:

Current account:

Services and income flows are estimated on quarterly basis by using the change as observed in the sampling based survey data combined with last known annual totals. This estimation procedure is the same used in Quarterly National Accounts.

Reinvestment of earnings:

Reinvestment of earnings is included in both the current and financial account. Reinvestment of earnings arising from a direct investor’s equity in its direct investment enterprise is calculated based on accounting variables profit and dividends.

Financial account:

Financial transactions are to a large extent estimated starting with observed investment positions. The definitional identity employed is: opening position + transactions + revaluations = closing position.

Most of the revaluations due to exchange rate movements are estimated combining exchange rates and information on foreign currencies in use for different variables.

The household’s holiday houses abroad are estimated based on tax information. Price changes and exchange rates are estimated from information from various countries.

Evaluation

The BoP data are subject to control and evaluation before each publication. The data is integrated with the National Accounts and International investment positions thereby allowing for consistency checks against total transactions and positions for the various items. Also checks on the breakdown of positions into price and volume components accommodates for evaluation of the results on transactions.

Not relevant

§ 2-6 of the Statistics Act states that data under no circumstances shall be published in such a way that they may be traced back to the supplier.

§2-4 of the Statistics Act contains provisions regarding professional secrecy for the staff as well as other provisions regarding confidentiality and integrity.

Statistics Norway have adapted the international recommendations for compiling BoP statistics and are therefore comparable with other countries' BoP statistics. Annual and quarterly current account data on a consistent form are available back to 1981 in the Statbank. Correspondingly for the financial account back to 2005. The Balance of Payments data has had several changes due to the new manuals BPM6 and ESA2010 and which has led to minor breaks in the time series.  Longer times series for annual and quarterly current account data are available back to 1970. Correspondingly for the financial account back to 1981. For the period 1994 - 2004 monthly data for both current and financial account are available. An historic table for Balance of Payments is available back to 1949, see 22.8 and 22.9.   

The Norwegian BoP makes use of information from a great variety of statistical sources and will reflect uncertainty and errors which might appear in these sources. However, the fact that BoP is a logical system within an even larger logical system of the National Accounts, it is possible to carry out a range of consistency checks to counterbalance the initial collection and then processing errors of the primary sources.

Preliminary quarterly and annual figures are revised until final annual figures are published (in August/September year t+2). See Administrative information, Frequency and timeliness.

In addition, periodical main revisions give revised figures. A main revision of the BoP time series were conducted in December 2014 with the implementation of the new manuals Balance of Payments and International Investment Position (BPM6) and European system of national Accounts (ESA2010). The BoP financial account has revised its time series back to 2005.