Understanding differences between BOP and ITGS

 

Understanding differences between BOP and ITGS

Due to the different concepts applying to BOP and ITGS, differences in the statistical products are most likely. These differences can arise from transactions in goods that either do not physically cross borders, or that do not involve a change of ownership although being shipped across borders. Additionally, valuation differences can also impact comparability. In order to better understand the conceptual impact, we will discuss selected items of particular relevance .

Figure 1: Goods traded under merchanting

Source: Eurostat Manual on goods sent abroad for processing

Goods not crossing borders

Goods that are not shipped across borders are usually not covered in IMTS. When a change of ownership takes place, however, the BOP compiler has to collect these items separately and add them to BOP transactions in goods. For the following items, separate recording in BOP statistics under the goods account is foreseen by the BPM6.

Goodsunder merchanting

Merchanting is defined as the purchase of goods by a resident from a non-resident combined with the subsequent resale of the same goods to another non-resident without the goods being present in the compiling economy (BPM6 paragraph 10.41). As a change of ownership applies, the BOP compiler records a transaction, while ITGS explicitly excludes this from recording (IMTS paragraph 1.50).

For the treatment of merchanting in BOP (BPM6 paragraph 10.44):

(a) the acquisition of goods by merchants is shown under goods as a negative export of the economy of the merchant;

(b) the sale of goods is shown under goods sold under merchanting as a positive export of the economy of the merchant;

(c) the difference between sales over purchases of goods under merchanting is shown as the item “net exports of goods under merchanting”;

(d) merchanting entries are valued at the transaction price agreed by the parties, not FOB (free on board).

As BPM6 suggests, with net recording of merchanting under exports of goods, negative export (negative credit) transactions could occur in economies with merchanting as a prominent economic activity. In such cases, gross transactions in BOP would show considerable differences to ITGS transactions. Net recording also makes economic reading of BOP exports of goods more difficult, and thus impacts the net balances of the BOP goods account.

Trade innon-monetary gold

Non-monetary gold covers all gold other than monetary gold. It can be held in the form of bullion (coins, ingots, bars, powder, etc.) and is traded between residents and non-residents, valued at transaction prices rather than FOB (BPM6 paragraph 10.50). However, non-monetary gold transactions between residents and non-residents do not necessarily require their physical movement, and would therefore appear excluded from ITGS.

Datasources

BOP statistics published by Eurostat is compiled on the basis of data provided by Member States. The national central banks or national statistical offices of Member States provide Eurostat with data using a set of questionnaires approved by all Member States and designed to fulfill the legal requirements. Each country compiles its own BOP statistics using the data from a number of surveys, data collection systems and administrative sources, while its compilation is conducted either by one institution (central bank or statistical office) or both. Methods used to collect and compile differ from one BOP item to the other within a country and from one country to another. Data for the BOP item goods are generally based on ITGS, which is often collected from customs administrations. The BOP compiler applies adjustments and complementation on these data, in order to accommodate the methodological differences between the BPM6 and IMTS 2010. Eurostat publishes monthly, quarterly and annual balances of payments. Monthly data are sent 44 days after the reference month, quarterly data are sent 85 days after the reference quarter with more details (by components and geographical breakdowns). Quarterly data are also revised when the annual data are published, in order to ensure consistency between quarterly and annual figures.

Context

The EU is a major player in the global economy for international trade in goods and services, as well as foreign investment. Balance of payments statistics give a complete picture of all external transactions for the EU and its individual Member States. Indeed, these statistics may be used as a tool to study the international exposure of different parts of the EU’s economy, however methodological differences to mirror statistics such as international trade statistics on goods, should be kept in mind, when conducting quality assessments of the data. The European Commission launches regular initiatives to calibrate macroeconomic risks in the EU Member States (such as the Macroeconomic imbalance procedure and The European semester). Potential macroeconomic risks are analysed among others by using 14 scoreboard indicators and additional auxiliary indicators. Some of them incorporate information from BOP statistics, e.g. current account balances, export shares, etc. Users conducting quality assessments in this context should keep in mind the methodological differences when comparing data of BOP trade in goods with the ITGS, and should not prematurely conclude on quality shortcomings in the light of the observed differences in both statistics.

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