New tables on national financial accounts in the Statistical Bulletin
In this month’s Banco de Portugal Statistical Bulletin, there will be found, for the first time, a set of new statistical tables (new Chapter F) with annual data on the national financial accounts (hereafter simply designated as Financial Accounts). The tables relate to the 2000-2004 period and cover financial transactions carried out by institutional sectors. The main items of the financial accounts have been published and analysed in the chapter “Financing of the Economy” in the Banco de Portugal Annual Report. The Banco de Portugal is also set to publish regular information on financial stocks.
The financial accounts are an integral part of the National Accounts and make up a compact statistical description of the economy’s financing structure. The information is presented in matrix format, making it possible to identify (a) the economic agents, broken down into five institutional sectors (Non-Financial Corporations, Financial Corporations, General Government, Households and the Rest of the World), and (b) the financial transactions relating to seven financial instruments (Monetary Gold and Special Drawing Rights, Currency and Deposits, Securities Other Than Shares, Loans, Shares and Other Equity, Insurance Technical Reserves and Other Debits and Credits).
One of the main purposes of the financial accounts is to ascertain the financial saving, i.e., the difference between financial assets acquired and financial liabilities incurred by each institutional sector in a given period. Positive saving indicates capacity to lend; negative saving indicates borrowing requirement.
The financial accounts are conceptually based on the European System of National and Regional Accounts 1995 (ESA 95). A detailed explanation on the methodology followed by the Banco de Portugal in implementing ESA 95 is presented in the Supplement to the Statistical Bulletin, June 2005, where there is also a presentation of the statistical results from 2000 to 2004. On the next paragraphs, a brief summary of this presentation is made, with the results for 2004 highlighted.
When resident sectors of the Portuguese economy are analysed as a whole and seen against the Rest of the World, the financing requirements of the Portuguese economy fell from 2001 to 2003 hitting 3.3 percent of GDP, and then rose in 2004, to stand at 5.9 percent of GDP (see Chart I).
Chart I - Annual Financial Saving of Institutional Sectors
The results through this period reveal a structural feature of the Portuguese economy: the Rest of the World and Households generate positive financial savings and are typically sectors that finance Non-Financial Corporations and General Government, the last being the sectors with the largest financing needs. It should be noted, however, that through the five years under review, the borrowing requirements of Non-Financial Corporations fell.
It is important to note that the 2004 development, like the previous year, was very much influenced by one-off budget measures introduced to bring the public deficit below 3 percent of GDP (see the article on “The Portuguese Economy in 2004” in the Economic Bulletin of the Banco de Portugal, Spring 2005, pp. 5-38).
In 2003, these measures included the transfer of a pension fund’s accounting reserves to the General Government pension fund (Caixa Geral de Aposentações) and the ceding of tax credits to a non-monetary financial institution. These two operations combined came to 2.3 percent of GDP. The General Government account also benefited from part of the receipts of the special programme for payment of tax arrears, initiated in 2002. In 2004, the one-off measures consisted exclusively of the transfer of pension funds accounting reserves to General Government (2.3 percent of GDP). Without these measures, the negative General Government financial saving would have been worse for each year, to the amount indicated above. Over and against this, the financial saving of other resident institutional sectors would have been impacted, above all the Financial Corporations, which would have come in with a marginally positive financial saving in 2004 (see Chart II).
Chart II - Financial Saving of Institutional Sectors Adjusted for One-off Measures in Budgetary Policy - 2003 and 2004
In terms of the Financial Corporations, it should be highlighted that net liabilities in deposits grew during 2004 in a context of less securitisation by banks. There was, in fact, an expansion in net assets in Loans during 2004, coming in with a figure of €16.4 billion. There was also less net investment in Securities Other Than Shares (this moved from the 2003 figure of €7.0 billion to €5.3 billion in 2004).
General Government in 2004 came in with negative saving at practically the same level as in 2003. There was, however, a rise in net issues of Securities Other Than Shares (from €2.8 billion to €4.5 billion), on the back of a big expansion in the issue of Treasury bills. The net amortisation of Long-Term Securities however rose from €0.6 billion to €1.3 billion. In terms of Loans incurred by General Government in 2004, it is worth highlighting the repurchase agreements carried out above all with non-residents.
In terms of Non-Financial Corporations, there were fewer issues of Shares and Other Equity (from €10.9 billion in 2003 to €5.5 billion in 2004). From this stemmed the increase in net assets channelled through this instrument. However, if operations undertaken by enterprises in offshore centres were excluded, the issues are none too different in the two years. There is also less use of Long-Term Loans as a form of financing (from €8.2 billion in 2003 to €3.6 billion in 2004). Against this, Deposits were lower than the previous year, falling from €4.2 billion to €1.0 billion.
Financial saving among Households fell from 2003 to 2004, tracking down from €4.7 billion to €4.0 billion. There were bigger placements in Deposits (from €0.5 billion to €4.0 billion) but the sector revealed a decrease in the capacity to lend. This is visible above all in the smaller placements in Securities Other Than Shares (from €4.3 billion to €2.8 billion), in more Long-Term Loans (from €8.0 billion to €9.3 billion), and in the fewer placements in Shares and Other Equity in the form of Mutual Fund Shares (from €2.0 billion to €1.1 billion).
The Rest of the World boosted the net financing to the Portuguese economy significantly in 2004 (moving from €4.3 billion to €8.0 billion). There was also clearly a different composition in the type of instrument used. On the one hand, net placements in Deposits rose considerably (these include Short-Term Loans to Monetary Financial Institutions) from €-3.7 billion to €8.0 billion, and in Securities Other Than Shares from €-8.5 billion to €-2.1 billion. On the other hand, there was a fall in net placements through Loans from €8.3 billion to €-0.7 billion and in Shares and Other Equity from €8.1 billion to €3.6 billion.