Balance of payments: Transition to the new compilation methodology - BPM6
23/03/2015 - Press Releases
As from reference month January 2015, the Bank of Greece starts publishing monthly balance of payments data in line with the 6th edition of the Balance of Payments Manual, which is published under the auspices of the International Monetary Fund (BPM6 – Balance of Payments Manual 6th Edition). This manual lays down the international standards for compiling balance of payments and international investment position statistics.
With the present press release, the Bank of Greece wishes to provide information on the transition to the new methodology for compiling the balance of payments statistics and the resulting changes in the presentation and classification of statistics. It should be noted that for the publication of data covering the period up to and including 31 December 2014, the balance of payments and the international investment position statistics were compiled on the basis of the methodology presented in the 5th edition of the relevant manual (BPM5 – Balance of Payments Manual 5th edition).
The methodology applied by the Bank of Greece to the balance of payments and the international investment position is part of the overall statistical framework of the Eurosystem and the European Union (EU). All EU countries have gradually adopted the 6th edition of the manual during 2014, while the European Central Bank (ECB) and Eurostat have been publishing the balance of payments of the euro area and the EU on the basis of the new methodology since the end of 2014.
Changes from the 5th to the 6th edition of the manual are relatively limited, since they do not affect the key structure of the balance of payments and the international investment position. The methodology of the 6th edition is actually an update of the previous one, allowing, on the one hand, a better presentation of developments in the aggregates related to international economic relations (and, therefore, of developments in the world economy) and, on the other hand, closer harmonisation with other macroeconomic statistics (especially with national accounts) as regards the terminology and classification of transactions.
Changes in the presentation of data
The main changes associated with the presentation of data concern, primarily, the introduction of the terms primary income account and secondary income account to replace the income account and the current transfers account respectively, so as to achieve greater consistency with national accounts.
The primary income account comprises from now on, apart from compensation of employees (wages, salaries) and investment income (interest, dividends, profits), some additional flows which were previously classified under current transfers. These flows form the category of “other primary income” and refer mainly to taxes and subsidies on products or production. The secondary income account, which as a concept is closer to the previously used current transfers account, will present from now on fewer receipts due to the fact that receipts from some EU funds have been reclassified to other primary income.
Another important change in the presentation of data is the recording of direct investment on the basis of the asset/liability principle instead of the direction of the investment principle that was applied so far.
More specifically, the main characteristic of the direction of the investment principle was the recording of data in net terms, i.e. the initial capital of the direct investor was recorded net of all reverse investment (from the direct investment enterprise to the direct investor).
According to the asset/liability principle, the presentation of direct investment data depends on whether these constitute an asset or a liability of the reference country. So, in the case of Greece for example, all residents’ investment abroad is recorded under assets and all non-residents’ investment in Greece is recorded under liabilities.
It should be pointed out that the new method does not affect the net balance of direct investment, but increases both assets and liabilities. However, it should be noted that the balance of payments data for Greece are not significantly influenced by the application of this new principle.
Changes in the classification of data
In the balance of goods and services, the major changes refer to internal reclassifications. The trade balance, which is renamed balance of goods for greater accuracy, no longer includes imports and exports of goods for repair and processing, which are reclassified from goods to services.
Merchanting of goods is classified under goods and presented as net exports (positive or negative). That is, purchases of goods under merchanting constitute a negative export instead of an import. Accordingly, sales of goods represent a positive export.
Under services, postal/courier services are moved from the communication services category, which is abolished, to transport services. Similarly, telecommunications are moved from communication services to telecommunications, computer and information services.
Change in the use of signs
Finally, it is necessary to mention a change in the use of signs in the presentation and reading of data in the financial account. A negative sign in assets will no longer imply an increase in assets (outflow) and a positive sign in assets will no longer imply a decrease in assets (inflow). On the contrary, a positive sign will indicate an increase in assets, while a negative sign will indicate a decrease in assets. Accordingly, a positive sign in liabilities will indicate their increase, while a negative sign will indicate their decrease.
The use of signs to denote increases/decreases in reserve assets is likewise changed. An increase in reserve assets is now shown with a positive sign, while a decrease in reserve assets is shown with a negative sign.
Changes in the presentation of banknote statistics
Along with the transition to the new methodology, a number of additional changes are also introduced in the items of the financial account – specifically, in other investment – which are linked with recent ECB/Eurostat decisions on euro area member countries’ statistical reporting of banknote issuance. The issues of banknotes above or below the key for subscription to the ECB's capital constitute liabilities or assets of member countries on the Eurosystem. So far, the balance of payments and international investment position data did not include any adjustment related to banknotes, in line with the applicable practice. The change in the recording of the relevant transactions affects significantly gross flows and external positions, but has little or no impact on net aggregates.
Availability of BPM6 time series
The Bank of Greece will publish monthly balance of payments data on the basis of the new methodology from reference month January 2015. Historical data will be available for the period from January 2009 onwards at a first stage, but efforts will be made to publish longer times series by the end of 2015. It should be noted that the implementation of the BPM6 is in progress and any additional adjustments in statistics will be presented in the context of regular data revisions.
The already existing time series based on the BPM5 methodology will not be abolished, but will continue to exist until they are completely replaced by the new time series. This is a way to ensure to users continuity in statistics and a smooth transition to the new method.
ECB: Implementing the new Balance of Payments Manual (BPM6)
Regulation (EU) No 555/2012
ECB Guideline (PDF, 1.3 MB)