1. How are BOP statistics used?
THE CONTRACTOR IS ACTING UNDER A FRAMEWORK CONTRACT CONCLUDED WITH THE COMMISSION

2. To understand drivers of domestic growth
GDP = C + G + I + X – M, where M = imports of goods and services C = household consumption G = government consumption I = gross capital formation1 X = exports of goods and services

3. To understand the drivers of GNDI
The definition of gross national disposable income (GNDI) is GDP plus net primary and secondary income from abroad, so GNDY = C + G + I + X – M + BPI + BSI, where BPI = balance on primary income BSI = balance on secondary income (net current transfers)

4. Current account balance
The current account mirrors the balance of saving / investment in an economy.
So, a current account surplus will reflect high saving (or lower investment).
Therefore policy makers need to consider impact of any policy changes designed to affect BOP (eg exchange rates) on domestic saving / investment.

5. Net lending and borrowing
The balance between the financial account and other entries can be expressed as: NLB = CAB + KAB = NFA, where NLB = net lending/net borrowing KAB = the capital account balance NFA = net financial account entries

6. Financing a current account deficit
The current account balance is funded by the change in net claims on the rest of the world.
A deficit on the current and capital accounts implies that the net acquisition of resources from the rest of the world must be paid for by either liquidating foreign assets (such as reserves) or increasing liabilities with non-residents.
Sustainability? Leads to pressure on exchange rates

7. Other
Sectoral analyses - Series of balances (eg trade in goods, trade in services, sectoral balances) that shed light on the performance of an economy.
Partner country analyses
Rates of return analyses

8. Integration of the accounts
Consistent classification of FA, IIP and income
Allows validation of data and calculation of earnings to stock ratios
Integrated IIP reconciles start and end values of IIP.
Reconciliation takes place through FA (transactions) and other changes in financial assets and liabilities accounts.

9. The balance sheet approach
Increased emphasis in BPM6 to reflect role of balance sheet in understanding vulnerability (nb financial crisis)
E.g. debt to GDP ratios (financial stability)
E.g. exposure to valuation changes
E.g. indicator of external debt sustainability
E.g. maturity of debt (short or long-term)
E.g. currency composition of debt
Understand structure of an economy
Ability to attract foreign investment
Degree of financial openness eg assets to GDP ratio
Size of foreign loans and deposits of banking sector
Indicator of future interest and dividend flows

10. Reconciled accounts

11. Current account balance (Q) - 1970 - 2015
Record deficit in 07 Q3 stands out quite starkly
In % terms, latest deficit on par with late-80s

12. Current account balance by component (Q)

13. Current account balance (A) – 1970 - 2015

14. IIP – Gross positions (Q)

15. Net IIP (% annualised GDP)