Balance of payment - current account
Prior to the recession in the early 1990's, the Faroe Islands ran sustained and often large deficits on the current account, resulting in foreign net debt of 1 147 million euro in 1990. Since 1992 there have been large surplusses on the current account, some years exceeding 10 per cent of GDP. Therefore, the economy has rapidly been reducing its net foreign debt, which in 2008 was reversed to foreign assets at 176 million euro.
Current account is compounded of tree parts:
Goods and services: Trade in goods and services has a tendency every year to result in a deficit. This is because of the simple fact that the import in goods and services is larger than the export. The deficit does however mainly derive from trade in services, while trade in goods is more varying. Trade in goods can vary much, for instance because some years there may be some big vessels bought or sold. Such selling or buying can influence the faroese trade in goods rather dramatically.
Income: Income covers two types of transactions between residents and nonresidents which is compensation of employees and investment income. For many years the income received from abroad have been higher than the income faroese have paid to other countries. For the same reason there is normally a surplus on this part of the balance of payments.
Current transfers: While there are only a few direct transfers from the Faroes to other countries, there are high direct transfers from Denmark to the Faroes. The surplus from current transfers have since 2002 been about 800 mill. DKK (108 mill.euro) since the transfer from the Danish Goverment was reduced in 2002. Before 2002 the surplus from direct transfers for some years had been approximately 1 100 mill. DKK.
