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Economy in Brief

 Contrasting Balance of Payments for Greece and Taiwan
by Louise Curley August 20 2007

Among the Haver updates released today were balance of payments data for Greece and Taiwan. The two countries have very different balances of payments. Greece traditionally runs a deficit on current account while Taiwan runs a surplus. Typically, a deficit (surplus) is offset largely by inflows (outflows) in its capital and financial accounts and changes in foreign exchange reserves. Because of difficulties in the measurement of all the various flows in the balance of payments, an item "errors and omissions" is introduced to balance the account. The first two charts show how Greece's current account deficit, and Taiwan's surplus are offset by changes in capital flows, foreign exchange reserves and "errors and omissions".

Greece's deficit on current account is the result of deficits on trade in goods and its income account that outweigh small surpluses on trade in services and transfer. Taiwan, on the other hand has a large surplus on goods and on its income account that more than offsets small deficits on trade in services and in transfers. The components of the current account for Greece and Taiwan are shown in the third and fourth charts.

When foreign exchange reserves are used to offset a deficit in the current account, they appear with a plus sign in the balance of payments account, however, the store of reserves has been reduced. Thus in the balance of payments a plus sign in the reserves means a decline in reserves and a minus sign indicates an increase. Over the years Taiwan has often opted to increase reserves, rather than invest the surplus on current account in foreign assets. At the end of June, Taiwanese reserves amounted to $266 billion, compared with $355 million for Greece.

Q2 07 Q1 07  Q2 06  Q/Q Dif Y/Y Dif 2006 2005 2004
GREECE (Millions Euros)
Current Account -4688 -9022 -6256 1334 -1432 -23660 -14348 -10453
Capital & Financial Account*
(Includes change in Reserves
8148 8800 6491 652 1657 23404 14655 10220
Errors and Omission -461 222 -235 -682 -226 255 -308 233
Actual Foreign Exchange Reserves
 (Mil US$)
355 466 514 -101 -159 389 326 679
TAIWAN (Millions US$)
Current Account 4976 8780 4511 -3804 465 24658 19019 18478
Capital & Financial Account -7187 -10998 -5841 3811 -1346 -19749 2185 7089
Change in Foreign Exchange Reserves  1893 -369 -482 2262 2375 -6086 -20056 -26595
Errors and Omission 318 2587 1812 -2269 -1494 1177 1852 1028
Actual Foreign Exchange Reserves
 (Mil US$)
266055 267490 260350 -1436 5705 266148 253290 241738
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