FDI takes €1.8 billion hit after drop in financial equity

Estimates on Malta’s Balance of Payments transactions during the fourth quarter last year revealed a worsening in the current account balance of €72.1 million, from a net positive balance of €29 million during the December 2012 quarter.

This turnaround was essentially brought about by deteriorations in both the income account and the goods account of the statement.

The income account was primarily marked by a decline in interest earnings on investments held by resident financial institutions; while the goods account was affected by a drop in export revenues that was stronger than the reduction in import outlays registered during the quarter under review. On the other hand, the current transfers account improved.

In the capital and financial account of the statement, the capital account recorded net inflows of €60.6 million while the financial account registered net inflows of €233.8 million.

Direct investment in Malta decreased by €1,816.3 million, wholly driven by a significant drop in equity of a financial intermediary.

The portfolio investment account recorded net inflows of €1,632.1 million, resulting from a net fall in foreign assets held abroad; while the other investment account registered net inflows of €454.1 million. Malta’s reserve assets increased by €23.1 million.

Malta’s transactions with the world revealed a current account deficit of €267.2 million with the European Union (EU), and a surplus balance of €224.2 million with the rest of the world (extra-EU).

As a result of lower outlays on imports in the goods account and lower current transfer payments with the EU, Malta’s current account balance with the region improved by €64.7 million. On the contrary, Malta’s current account surplus with the rest of the world decreased by €136.8 million due to a deterioration in the net positive balances of all the main accounts in the statement.