Bank deleveraging behind the slump in financial flows

While the net external financial surplus, which offsets the current account deficit, has remained broadly unchanged at around 3% of GDP over the past few years, the separate financial inflows and outflows have recently slumped. For the first time since the height of the financial crisis in late 2008 and early 2009, claims on and liabilities to foreigners both fell outright in the first half of this year. In total, external financial inflows and outflows have fallen from around 12% of GDP in late 2010 to minus 4% in the first half of this year.