Swiss Balance of Payments and International Investment Position: Q4 2017 and review of the year 2017

Current Account

The current account was down 9.6% against the same quarter in 2016.

Key figures:

Current Account: -9.6% against Q4/2016 to 19,679 bn. CHF

• of which Trade Balance: +24.4%  to 17,279 bn.
• of which Services Balance: -4.0% to 4,820 bn.
• of which Investment Income: -42.7% to 5,877 bn.

Higher Trade Surplus in Goods: +24.4%

Main Reason:

• The weaker franc helped to achieve a record trade surplus
• higher exports of chemical and pharmaceutical  products
•  machinery and electronics.
• merchanting also expanded

Smaller Surplus in Services

Main Reason:

• License fee income back to normal after exceptionally strong Q4/2016

Investment Income nearly halved

• Receipts in Investment Income fell by 10%, while expenses were nearly the same as in Q4/2016.
• This results in 42% drop in the net figure

Swiss Balance of Payments Q4 2017

Source: snb.ch - Click to enlarge

Financial account

Key Figures:

• Massive statistical difference, that amounts nearly to whole current account surplus.

The following is from the official press release and gives more details on the other parts of the financial account.

Net acquisition of financial assets

Overall, the assets side of the financial account registered a net acquisition of CHF 3 billion (Q4 2016: net acquisition of CHF 45 billion). The other investment item saw a net acquisition of CHF 9 billion (Q4 2016: net acquisition of CHF 13 billion). While the SNB and the other sectors category increased their claims abroad, commercial banks in Switzerland reduced their claims in cross-border interbank business. Direct investment saw a net acquisition of CHF 4 billion (Q4 2016: net acquisition of CHF 12 billion). Resident companies granted loans to non-resident group companies. They also reinvested income, while at the same time withdrawing equity capital from subsidiaries abroad. Reserve assets posted a net acquisition of CHF 3 billion (Q4 2016: net acquisition of CHF 21 billion). By contrast, portfolio investment recorded a net reduction of CHF 13 billion (Q4 2016: net reduction of CHF 1 billion). In net terms, resident investors mainly disposed of long-term debt securities and shares issued by non-residents.

Net incurrence of liabilities

Overall, net incurrence of liabilities amounted to CHF 2 billion (Q4 2016: net incurrence of CHF 15 billion). Direct investment recorded a net incurrence of CHF 5 billion (Q4 2016: net incurrence of CHF 8 billion). Non-resident companies granted more loans to their resident subsidiaries. They also reinvested income, while withdrawing equity capital. By contrast, portfolio investment showed a net reduction of CHF 2 billion (Q4 2016: net reduction of CHF 10 billion). Non-resident investors primarily disposed of equity securities issued by residents. The other investment item registered a net reduction of CHF 1 billion (Q4 2016: net incurrence of CHF 18 billion). While resident commercial banks reduced their claims against customers and banks abroad, loan commitments of resident companies with respect to non-residents increased.

Net

The financial account balance came to CHF 1 billion (Q4 2016: CHF 34 billion). This figure is calculated as the sum of all net acquisitions of assets minus the sum of all net incurrences of liabilities plus the balance from derivatives transactions. The financial account balance corresponds to the change in the net investment position resulting from cross-border investment.

Switzerland Financial Account

Extract from the Balance of Payments Q4 2017 Source: snb.ch - Click to enlarge

Switzerland’s International investment position

Assets

Stocks of foreign financial assets were up CHF 75 billion on the previous quarter to CHF 4,768 billion. Valuation changes, in particular, were responsible for the increase. Since the major part of assets is held in foreign currencies, it was the strengthening of the euro against the Swiss franc, above all, which led to currency gains. In addition, capital gains arising from higher prices on foreign stock markets contributed to the increase. Stocks of portfolio investment rose by CHF 29 billion to CHF 1,375 billion. Reserve assets grew by CHF 20 billion to CHF 792 billion. Stocks of direct investment were up by CHF 19 billion to CHF 1,659 billion, while those of the other investment item also advanced, by CHF 13 billion to CHF 858 billion. By contrast, stocks of derivatives declined by CHF 5 billion to CHF 83 billion.

Liabilities

Stocks of foreign liabilities were up by CHF 41 billion to CHF 3,920 billion, mainly due to valuation changes resulting from domestic stock market advances. Stocks of portfolio investment rose by CHF 28 billion to CHF 1,175 billion, while those of direct investment increased by CHF 11 billion to CHF 1,452 billion. Stocks of the other investment item advanced by CHF 7 billion to CHF 1,207 billion. By contrast, stocks of derivatives declined by CHF 4 billion to CHF 86 billion.

Net international investment position

Since foreign financial assets climbed more markedly (CHF +75 billion) than foreign liabilities (CHF +41 billion), the net international investment position advanced by CHF 34 billion to CHF 848 billion.

Switzerland International Investment Position

Switzerland International Investment Position - Q4 2017 Source: snb.ch - Click to enlarge