Provisional statistics on the external transactions of Malta with the world during the first quarter of 2008 reveal an improvement in the current account balance of €8.8 million, from a net deficit of €77.5 million during the March 2007 quarter to one of €68.6 million during the same quarter this year.

Causing this amelioration in the current account balance were essentially the combined shifts recorded in the net balances of both the income account as well as the current transfers account of the statement. Indeed, the net negative balance in the income account contracted by €49.7 million, from a net deficit of €46.2 million during the January to March 2007 quarter to one of €6.5 million during the comparable quarter this year; whereas that in the current transfers account shifted by €48.7 million, from a net deficit of €8.0 million during the March 2007 quarter to a net surplus of €40.6 million during the corresponding period this year. The income account was favourably affected by lower dividend payments to foreign shareholders having a direct ownership in locallyoperating entities as well as by a decline in retained profits that are due to the same direct foreign investors; while the current transfers account was influenced by higher transfer receipts that were received by the Government from non-resident entities abroad.

On the contrary, however, the current account balance was adversely affected by unfavourable shifts in the goods account and the services account of the statement. The net negative balance in the goods account expanded by €65.5 million, from a net deficit of €183.1 million during the January to March 2007 period to one of €248.6 million during the same period in 2008; whereas the net positive balance in the services account shrunk by €24.1 million, from a net surplus of €170.0 million during the March 2007 quarter to one of €145.8 million during the relative quarter this year. Indeed, as can be seen in Table 1, the goods account was influenced by the dual effect of a drop in merchandise receipts of €23.4 million as well as by a rise in outlays on merchandise imports of €42.1 million. On the other hand, the services account was affected by a rise in expenditure by Maltese travellers going abroad of €11.6 million that was higher than the increase in receipts from tourists visiting the Maltese Islands of €4.0 million. Also, the same account was marked by a fall in revenue of €14.3 million from a selection of services provided to non-residents abroad as well as by an increase of €13.9 million in outlays on services acquired from foreign entities abroad.

As regards the capital and financial account of the statement, the capital account was characterised by net inflows of €3.3 million as opposed to net inflows of €3.9 million during the first quarter of 2007; while the financial account was characterised by net outflows of €16.3 million as against net inflows of €162.1 million during the first three months of 2007.

Indeed, the direct investment abroad was shaped by net outflows of €41.4 million as opposed to net inflows of €7.1 million during the January to March period of 2007; whereas the direct investment in Malta was marked by net inflows of €93.1 million as against net inflows of €142.2 million during the March quarter last year.

The portfolio investment account was characterised by net outflows of €13.0 million as opposed to net outflows of €133.0 million during the March quarter of 2007; while the other investment account was shaped by net inflows of €151.6 million as against net outflows of €2.9 million. Also, during the period under review, the reserve assets of the country rose by €69.4 million. Nevertheless, it should be pointed out that, as explained in the methodological note 12 at the end of this release, the figures recorded in the latter three accounts of the statement are not strictly comparable to those recorded in the same accounts during the corresponding quarter last year.