Contrasting Balance of Payments for Greece and Taiwan

Among the Haver updates released today were balance of payments data for Greece and Taiwan. The two countries have very different balances of payments. Greece traditionally runs a deficit on current account while Taiwan runs a surplus. Typically, a deficit (surplus) is offset largely by inflows (outflows) in its capital and financial accounts and changes in foreign exchange reserves. Because of difficulties in the measurement of all the various flows in the balance of payments, an item "errors and omissions" is introduced to balance the account. The first two charts show how Greece's current account deficit, and Taiwan's surplus are offset by changes in capital flows, foreign exchange reserves and "errors and omissions".

Greece's deficit on current account is the result of deficits on trade in goods and its income account that outweigh small surpluses on trade in services and transfer. Taiwan, on the other hand has a large surplus on goods and on its income account that more than offsets small deficits on trade in services and in transfers. The components of the current account for Greece and Taiwan are shown in the third and fourth charts.

When foreign exchange reserves are used to offset a deficit in the current account, they appear with a plus sign in the balance of payments account, however, the store of reserves has been reduced. Thus in the balance of payments a plus sign in the reserves means a decline in reserves and a minus sign indicates an increase. Over the years Taiwan has often opted to increase reserves, rather than invest the surplus on current account in foreign assets. At the end of June, Taiwanese reserves amounted to $266 billion, compared with $355 million for Greece.