Monday, 20 June 2011

More "economic journalism"

From the TVNZ news website:
The balance of payments probably swung to a surplus in the first quarter, driven by reinsurance flows for the Christchurch earthquakes, while the underlying current account deficit may have worsened.
How can something, in this case the BoP, which is zero by construction have "swung to a surplus"? I guess what they actually mean is that the capital account will have gone into surplus because of the reinsurance inflows and thus the current account must have gone into deficient, since (roughly) the current account is equal to the negative of the capital account. Thus leaving the BoP at zero.

Is this really so hard for journalists to understand?


James said...

Journalists seem to have been confusing the BoP and the current account or trade account since... forever?

On a related note, have a quick read through of this:

Up until today the insurace inflows have been recorded as one off inflows in the transfers balance, something I thought was a little strange. Fairly soon, however, they're moving the inflows over to the capital account (like you mention).

This means that the current account surplus(es?) that were hailed recently will be revised - deficits ahoy. So much for that "rebalancing" we were supposedly undergoing.

Paul Walker said...

Thanks James. I had been assuming that the insurance claims would have been part of the capital account.