The balance of payments and international investment position

The balance of payments measures transactions between residents and non-residents, i.e. between economic agents (banks, businesses, households, public administrations) that conduct their business in France and economic agents that conduct their business abroad. The balance of payments shows all transactions with the rest of the world in the current account and financial account. The current account covers economic transactions, which reflect trade in goods and services and income transfers. The current account balance is a measure of a country’s (in our case, France) ability to balance its trade with other countries. Transactions included in the financial account arise from the financial dealings of resident economic agents with foreign countries. They are broken down into direct, portfolio and financial derivatives investments, other investment and reserve asset income. The financial account balance represents the financial counterpart to current account flows.

The net international investment position shows the net assets or liabilities of the French (residents) relative to the rest of the world. A negative value means that French residents have received more capital from abroad (mainly in the form of debt or capital investments) than they have invested in foreign countries.

In 2023, the current account deficit reached EUR 28.1 billion, virtually unchanged when compared to 2022 (EUR 31.1 billion). The marked decline in energy commodity prices, which reduced the trade in goods deficit, was offset by a simultaneous decrease in the trade in services surplus (i.e. the fall in sea freight prices, which impact exports) and investment income due to higher interest rates.

Consequently, the current account deficit was significantly higher than its average over the last ten years (EUR 15 billion). Although it has come down, the energy bill is still higher than its long-term average, as is the case with non-energy customs trade, for which the deficit has increased. These trends were only partially offset by a slightly higher-than-average trade in services surplus.

As a result, the financial account recorded net capital inflows of EUR 35.7 billion, a level equivalent to that of 2022. Portfolio investment continues to cover the bulk of the nation's borrowing requirements, with net capital inflows of EUR 138.9 billion.

France's net international investment position deteriorated by EUR 133.5 billion year on year, to EUR 792.9 billion – or by 28.1% of GDP, compared with a deterioration of 24.8% in 2022 – mainly as a result of the current account deficit, movements in asset prices and the euro exchange rate, which made resident assets held by non residents more expensive than non-resident assets held by residents.
 

Since 1948, the balance of payments has been compiled according to an internationally applied methodology developed by the International Monetary Fund (IMF) and set out in its Balance of Payments and International Investment Position Manual (BPM6). The balance of payments has been the main statistical reference document since the IMF’s creation for providing a global and harmonised view of the development of international trade and for measuring its balances and imbalances. France’s balance of payments and international investment statistics comply with the IMF’s BPM6 manual.

In accordance with Article L. 141-6 of the French Monetary and Financial Code (Code monétaire et financier), the Banque de France is responsible for establishing France’s balance of payments and international investment position. The Banque de France has the authority to obtain any documents and information it may require from all economic and financial agents. The full legislative and regulatory framework is available on the reporting entities page.

Banque de France implementation of the coordinated European Quality Framework for Balance of Payments statistics.

The balance of payments statistics contribute to the production of a European scoreboard of indicators on the prevention and correction of macroeconomic imbalances.

Given the importance of these statistics in analysing the national economy – and indeed for making comparisons between national economies – the Banque de France lends its support to international initiatives to assess the quality of balance of payments statistics. It has voluntarily adopted the most rigorous international standards, particularly the Data Quality Assessment Framework defined by the International Monetary Fund and the Committee on Monetary, Financial and Balance of Payments Statistics (CMFB) roadmap.

The CMFB acts as a coordination forum for central banks, national statistical institutes, the European Central Bank and Eurostat to draw up recommendations and advise the European Commission on monetary, financial and balance of payments statistics.

The legal framework of reference is Article L. 141-1 of the French Monetary and Financial Code (Code monétaire et financier), underpinned by Article 130 of the Treaty on the Functioning of the European Union and Article 7 of the Statute of the ESCB and the ECB, guaranteeing the Banque de France’s independence in the performance of its duties. Furthermore, Article L. 141-6 of the French Monetary and Financial Code gives the Banque de France exclusive authority with regard to the preparation of France's balance of payments.

The data collection process is based on the 6th Edition of the International Monetary Fund's Balance of Payments and International Investment Position Manual, and the statistics produced are made available by the Banque de France itself, via the annual balance of payments report and the Banque de France website's data series download portal, Webstat.

The Banque de France also reports these statistics to international and European institutions, notably the European Central Bank (ECB) and Eurostat. The data are then used to prepare the balance of payments for the euro zone and the European Union.