Balance Of Payments: Deficit In the Second Quarter Decreased, New Methodology Applied

The Central Bank of Bosnia and Herzegovina (CBBH) published data on the balance of payments transactions for the second quarter of 2012, and they indicate that the current account deficit in the second quarter of 2012,  amounted to KM 901 million, which is 8.2% lower deficit than in the same quarter last year. It is important to mention that there was a high inflow of foreign direct investments in BH in the second quarter, amounting to KM 491 million and that the foreign exchange reserves decreased by KM 230 million.  Cumulative current account deficit for the first half of the year in 2012, reached KM 1.75 billion, which is compared with the same period last year, an increase of 10.6%. It is encouraging to have now the stop of this first quarter upward trend in deficit, when, as a result of extreme low exports the deficit was unusually large (KM 853 million).

Since the second quarter 2012 on, the balance of payments statistics' users should pay attention to the compliance of compilation and presentation processes of the balance of payments statistics for BH with the new international methodological standards (Handbook for the Compilation and Dissemination of Balance of Payments Statistics and International Investment Position, sixth edition (BPM6).

Related to this, we carried out the revision of the data from the first quarter of 2007 until now, which provided for users the sufficiently long data series for review of the balance of payments statistics for BH.

Compared with the previously applied methodology, the new methodology (BPM6) has the following significant changes:

- The new structure of the balance of payments presentation with the introduction of Primary and Secondary Income (instead of Income and Transfer);

- Imports and exports of goods for processing are classified in services (imports: goods which do not change the owner, but they are imported into our country in order to produce the finished product out of them, which are then, imported in the country of the owner by the owner himself as a finished product, and the opposite is applied for the exports); 

- Changes in the measurement of financial services, as well as the measurement of insurance and pensions services;

- Processing of data on insurance and pensions services, since they are not calculated in transfers any more;

- Treatment of the foreign direct investment (adjusted with the OECD Guidelines and the definition of foreign direct investments, the treatment of the investment chain and the affiliated companies, the presentation of direct investments on gross amounts of assets and liabilities, as well as the principles of investment directing);

- A new concept in the treatment of international remittances

- greater similarity with the System of National Accounts - SNA (the classification of financial instruments, the same terminology used - the Primary and Secondary Income).

With the introduction of this methodology in 2012, the CBBH has become one of the first institutions in Europe (EU countries plan to introduce  it from 2014), and in the world (next to Australia, Brazil), which managed to apply the new methodology in own operations.

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