Balance of Payments

On January 1, 2006, a completely new system for compiling Austria’s balance of payments was put in place. The OeNB has already reported about this new framework and its related cooperation with Statistics Austria¹). By and large, this reform marked a switch from a statistical system based on payment information to a direct reporting system based on spot checks of economic agents. The introduction of the new system went hand in hand with a functional improvement, above all a broad harmonization with the System of National Accounts (SNA), supported by the now readily available direct information. Yet, owing to the reforms, users could no longer compare Austrian current account data before and after 2006. Therefore, the OeNB recalculated the historical data between 1995 and 2005 on the basis of the new framework. The new tables containing this information are available on the OeNB’s website.

Chart 1 shows the results based upon the new statistical framework as well as the Austrian current account according to the previous system. The bars represent the new time series, the line the old time series. The comparison immediately shows that both the old and the new statistical framework clearly reflect the general trend, namely the gradual expansion of Austrian external trade, which is in line with the premise that statistical output remain stable. However, the results under the new framework show that the improvement had already started earlier and was much stronger than initially observed. According to the new data, the trend reversal already began in the mid-1990s. Moreover, the positive effects on external trade following the introduction of the euro in 2002 were much more pronounced than previously assumed. These diverging results can be explained by the improvement of the quality of the statistical output as a consequence of higher accuracy, increased structural information as well as improved comparability with other international and national statistical data.

The next section discusses those components of the current account in further detail where the new framework uses a different methodology. Table 2 closes with a summary that visualizes individual effects on the current account. The most significant changes apply to: 

• goods and transportation,

• travel,

• insurance services,

• current transfers and compensation of employees.

 As regards data on trade in goods, the foreign trade statistics compiled by Statistics Austria remains the main data source²).  Unlike under the old framework, since 2006, and in the recalculations for the period between 1995 and 2005, foreign trade data are covered in detail in the new balance of payments. The transition table includes e.g. goods for processing, nonmonetary gold, repairs on goods and goods procured in ports by carriers. In line with the national accounts system, gap estimates for illicit trade and aid supplies are also recognized as well as a consideration of customs clearing within an economic union disregarding the actual destination of a good (pseudo transit and so-called “Rotterdam effect”)³). The transition table provides clear information on the differences in trade in goods according to external trade statistics and current account statistics, as they follow different concepts⁴).

The most important new feature in terms of changed volumes and balances is the adjustment of imported goods for the transport elements (c.i.f.-f.o.b. adjustment)⁵).  The old framework took for granted that the transport of imports was mainly organized by domestic importers; thus the incurred transport costs were not part of billed imports. Consequently, the difference between the value of the imported goods according to payment information and according to trade statistics, which comprise the cost incurred for the transport to the border of the importing country (c.i.f. valuation), should be negative. As this difference was charged to services not allocated, the transport costs identified separately also had to be entered into this item as an adjustment (the principle of double-entry bookkeeping). Another assumption under the old framework was that the amount of the necessary adjustments was equivalent to the recorded import value of freight transports. The upper part of table 1 contains a step-by-step description of this adjustment process. The lower part of table 1 shows the procedure according to the new current account system. The assumed correction for the transport costs of imported goods is based on a model calculation that considers information on the volume of imported goods, distances to partner countries and freight cost. The resulting new correction has a more solid data basis and is significantly smaller than previously assumed. This results in a comparatively higher import value in the goods account under the new framework than in earlier current account series. In the new system, the corresponding offsetting correction is done under transport services, assuming – in accordance with the experts of the Austrian Federal Economic Chamber – that foreign exporters organize the majority of goods imports. Consequently, transport volumes have gone down on the export side and up on the import side under the new framework. On balance, the surplus generated by transport services has thus declined.

With the change from the payment information system to the direct reporting system as a basis for the current account statistics, the component services not allocated has completely disappeared from statistical output.  As the name implied, this component was a kind of statistical “black box” containing information which was thought to belong to services, but which could not be attributed to any specific service category for lack of detail. In the last few years of the operation of the old system, this component tended to increase steadily in volume, particularly on the import side, which contributed to an expanding deficit. On the one hand, the elimination of this component following the collection of more detailed services statistics has contributed to a general decrease in service volumes, on the other hand, it has contributed to the improvement of the current account balance described above. With respect to diminishing trade in service volumes, one has to acknowledge that payment information was overstated due to retransferals and counterorders. This gap increased upon introduction of the euro, new payment systems as well as the growing importance of Austrian banks for Eastern European economies.

Travel constitutes another important component of the new framework, as it has always been a crucial source of external income for Austria. Following the introduction of the common currency in Europe, payments systems have gradually been abandoned as a data source. Since 2006, the collection of revenue and expenditure data on the basis of incoming and outgoing travel has been based entirely on a hybrid framework that draws on a variety of information sources to compile data. Revenue data is mainly taken from accommodation statistics and the customer survey on spending patterns of tourists, “Tourism Monitor Austria.” The main data source for estimates of Austrians’ expenditure abroad is the quarterly household survey; it is rounded out by partner countries’ complementary mirror data on incoming Austrian tourists as well as credit and debit card information.

A new feature of the new Austrian current account framework is the use of registry and administrative data. According to the new Foreign Exchange Act, the OeNB may use official sources for statistical purposes. This constitutes an essential prerequisite for harmonizing statistics and alleviating respondents’ reporting burden. Thus, additional information sources – the population census, statistics on wage and salary taxes, social security data and tertiary education statistics – help in compiling travel data. Such statistics provide information e.g. on seasonal workers in Austria, education expenditure in Austria and abroad as well as health travel data. The methodological changes in the collection of travel data have contributed to an improved balance as well as to a better understanding of seasonal patterns: Data are now collected when tourists actually travel rather than when they settle their bills, so that Austrian winter and summer tourism data can now be attributed more accurately to the time of transaction⁶).

A major overhaul has also taken place in the calculation of insurance services. The old system allowed neither for a distinction between premia and claims nor for a distinction between various insurance categories. Yet since 2006, the OeNB has also used the administrative data of the Financial Market Authority (FMA) for the current account. In line with the relevant EU regulation, the FMA has received information about the Austrian insurance companies’ cross-border services since the mid-1990s. These data, which have been expanded for use in current account statistics, enable the OeNB to estimate the services component in line with the national accounts. In principle, the concept of the net premium is used, i.e. the difference between the insurance premiums earned and claims actually paid. Given that the results of this calculation may be negative in individual reporting periods and thus irrational in economic terms (negative value added), a long-term smoothing is performed. National accounts data show the national share of the net premium in total premia received by insurance categories. The OeNB uses this percentage to calculate the insurance service charge per country and period. The remaining share of insurance premium earned as well as claims actually paid are considered in the current transfers. Life insurance constitutes the only exception, as it is recorded in the capital account due to their inherent capital component. The new calculation method has led to a volume decline in insurance services against the old system. On balance, this subaccount for services has improved.

Compilation methods have also changed significantly in the area of the above-mentioned current transfers. This subaccount has been adjusted for components irrelevant for external statistics, such as value-added tax elements. Since 2006, the new calculations and likewise also the recalculations of the historical data take into account the transfer components drawn from insurance services, as described above. Moreover, a shift between public and private transfers was performed in line with the System of National Accounts, as classification is no longer based on the source of the transfer payment but rather on the ultimate beneficiary. The new framework draws on a wide variety of administrative data to calculate current transfers, particularly data on payments to and from the EU as well as foreign workers’ remittances and related compensations of employees. Data sources range from primary data of the Austrian final budget accounts to income tax and social security data. These data are always treated as strictly confidential information and are used for statistical purposes only. The new framework for current transfers has reduced gross flows in the statistical results. Although this balance still closes with a markedly negative result, under the new framework the results closest to the end of the respective reporting period have improved⁷).

Table 2 summarizes the results and interrelationships between the subaccounts under the new framework and show the impact on the overall current account. As show in chart 1, the changeover from the old to the new system has improved the current account series, with the services balance contributing most to this improvement. This improvement is attributable to the elimination of services not allocated, the methodological changes in compiling travel data and the broad harmonization with the national accounts. Overall, the transition to the new framework can be characterized as a change from a full-coverage system to a sample data system. Thus while technically overrecorded payment flows have decreased, external statistics now comprise samples complemented by estimates of unseizable transactions, providing accuracy of detail and greater structural precision.