Provisional estimates on the international economic and financial transactions of Malta during the last quarter of 2007 reveal a deterioration in the current account balance of Lm51.7 million (€120.3 million), from a net deficit of Lm48.7 million (€113.5 million) during the December 2006 quarter to one of Lm100.4 million (€233.8 million) during the corresponding quarter in 2007.

Contributing towards this deterioration was essentially the combined effect of an expansion in the visible trade gap in the goods account as well as an increase in the net negative balance of the current transfers account of the statement. The net negative balance in the goods account increased by Lm51.7 million (€120.4 million), from a net deficit of Lm67.1 million (€156.3 million) during the fourth quarter of 2006 to one of Lm118.8 million (€276.7 million) during the same quarter in 2007.

The current transfers account rose by Lm10.0 million (€23.2 million) from a net deficit of Lm29.4 million (€68.4 million) during the December 2006 quarter to one of Lm39.3 million (€91.6 million) during the corresponding quarter last year. The goods account was shaped by the twofold effect of a fall in revenue from merchandise exports of Lm29.2 million (€67.9 million) as well as by an increase in outlays on merchandise imports of Lm22.6 million (€52.5 million).

On the other hand, the net balance in the income account of the statement improved by Lm6.3 million (€14.8 million), while that in the services account ameliorated by Lm3.7 million (€8.6 million).

In the capital and financial account of the statement, the capital account was marked by net inflows of Lm7.5 million (€17.4 million) as opposed to net inflows of Lm27.5 million (€64.0 million) during the December 2006 quarter; while the financial account was characterised by net inflows of Lm15.9 million (€37.0 million) as against net inflows of Lm73.9 million (€172.1 million) during the fourth quarter of 2006.

Direct investment in Malta registered net inflows of Lm20.8 million (€48.5 million) as compared to net inflows of Lm101.7 million (€236.9 million) during the December 2006 quarter; whereas direct investment abroad registered net outflows of Lm6.4 million (€14.8 million) as against net outflows of Lm0.8 million (€1.9 million) during the last three months of 2006.

Additionally, the portfolio investment account was shaped by net inflows of Lm60.9 million (€142.0 million) as opposed to net outflows of Lm139.4 million (€324.7 million) during the corresponding quarter in 2006; while the other investment account was marked by net inflows of Lm125.4 million (€292.0 million) as against net inflows of Lm92.3 million (€215.0 million) during the last quarter of 2006.

As a result of the above shifts in the statement as well as a consequence of an exercise by the Central Bank of Malta that obliges all credit institutions operating in Malta to hold reserve deposits in line with the European Central Bank directions on minium reserve requirements, the reserve assets of the country rose by Lm203.3 million (€473.6 million) as opposed to a decrease of Lm18.9 million (€44.1 million) during the December quarter in 2006. Neverthless, this change is expected to be reversed by the beginning of 2008.

October-December 2007: Balance of Payments Transactions with the EU and Extra-EU countries

In a separate statement detailing the balance of payments transactions that Malta conducted with European Union (EU) and Extra-EU countries during the fourth quarter of 2007, it is shown that Malta recorded a deterioration in the current account balance with the EU of Lm25.7 million (€59.9 million), from a net deficit of Lm117.2 million (€272.9 million) during the last quarter of 2006 to one of Lm142.9 million (€332.8 million) during the same quarter in 2007. This was generated by an expansion in the visible trade gap of Malta with the EU of Lm51.2 million (€119.3 million) as well as by a rise in the net deficit of the current transfers account with the same region of Lm8.4 million (€19.6 million).

Also, the current account balance of Malta with Extra-EU countries deteriorated by Lm25.9 million (€60.4 million), from a net surplus of Lm68.4 million (€159.4 million) during the December 2006 quarter to one of Lm42.5 million (€99.0 million) during the corresponding period in 2007. In this case, however, the principal driving force for the recorded deterioration was an adverse shift in the net balance of the services account of Lm20.8 million (€48.4 million) as well as a decline in the net positive balance of the income account of Lm3.1 million (€7.3 million).

January-December 2007: Balance of Payments Transactions with the World

Over a span of twelve months ending in December 2007, the current account balance of Malta with its world trading partners is estimated to have improved by Lm51.6 million (€120.2 million), from a net deficit of Lm179.7 million (€418.6 million) during 2006 to one of Lm128.1 million (€298.4 million) during 2007. Indeed, this was contributed by improvements recorded in the net balances of the income account and the services account of the statement of Lm36.6 million (€85.2 million) and Lm30.1 million (€70.1 million) respectively, as well as by a contraction in the visible trade gap of the goods account of Lm9.2 million (€21.4 million).