Indicators - Macroeconomic Imbalance Procedure (2023)

The current account provides information about the transactions of a country with the rest of the world. It covers all transactions (other than those in financial items) in goods, services, primary income and secondary income which occur between resident and non-resident units. It is either expressed as % of GDP or millions of national currency. The financial flows are marked as a credit, a debit or a balance. The current account together with the capital and the financial accounts forms the Balance of Payments (BoP).

The MIP scoreboard indicator is the three-year backward moving average of the current account balance expressed in percent of GDP and calculated as:

[ [ (CA / GDP)t + (CA / GDP)t-1 + (CA / GDP)t-2 ] / 3 ] * 100

The indicative thresholds for the indicator are of +6% and -4%.

The indicator is based on the 'Balance of Payments' (BoP) data reported to Eurostat by the EU Member States. These data are quarterly reported by the EU Member States. Starting from October 2014 definitions are based on the Sixth Edition of the IMF's Balance of Payments and International Investment Position Manual (BPM6).

The international investment position (IIP) is a statistical statement that shows at a point in time the value and composition of:

• financial assets of residents of an economy that are claims on non-residents and gold bullion held as reserve assets;
• liabilities of residents of an economy to non-residents.

The difference between an economy's external financial assets and liabilities is the economy's net IIP, which may be positive or negative.

Respectively the net international investment position (NIIP) provides an aggregate view of the net financial position (assets minus liabilities) of a country vis-à-vis the rest of the world. It allows for a stock-flow analysis of external position of the country.

The MIP scoreboard indicator is the net international investment position expressed in percent of GDP and calculated as:

[ NIIPt / GDPt ] * 100.

The indicative threshold is -35%.

The real effective exchange rate (REER) aims to assess a country's price or cost competitiveness relative to its principal competitors in international markets. Changes in cost and price competitiveness depend not only on exchange rate movements but also on cost and price trends.

The specific REER for the Macroeconomic Imbalances Procedure is deflated by the consumer price indices relative to a panel of 42 countries (double export weights are used to calculate REERs, reflecting not only competition in the home markets of the various competitors, but also competition in export markets elsewhere). A positive value means real appreciation.

Data come from the Directorate General for Economic and Financial Affairs (DG ECFIN).

The MIP scoreboard indicator is the percentage change over three years of the real effective exchange rate (REER) based on consumer price index deflators relative to 42 trading partners, and is calculated as:

[ [ (REER_HICP_42)t - (REER_HICP_42)t-3 ] / (REER_HICP_42)t-3 ] * 100.

The indicative thresholds are +/- 5% for euro area and +/- 11% for non-euro area countries.

The export market share is calculated by dividing the exports of the country by the total exports of the region/world. The indicator measures the degree of importance of a country within the total exports of the region/world. For the calculation at current prices, the market share refers to the world trade (world export market share).

Data on the values of exports of goods and services are compiled as part of the Balance of Payments of each country. Data source of statistics on 'total world' which are used as a denominator is theWorld Economic Outlook, International Monetary Fund (IMF)).

A country might lose shares of export market not only if exports decline but most importantly if its exports do not grow at the same rate of world exports and its relative position at the global level deteriorates.

To capture the structural losses in competitiveness that can accumulate over longer time periods, the MIP scoreboard indicator is the percentage change of export market shares (of goods and services) over five years, and is calculated as:

[ [ (EXPc / EXPworld)t - (EXPc / EXPworld)t-5 ] / (EXPc / EXPworld)t-5 ] * 100.

The lower indicative threshold is -6%.

The Nominal unit labour cost (NULC) index is defined as the ratio of labour cost to labour productivity, where labour cost is the ratio of the compensation of employees (current prices) to the number of employees, and labour productivity is the ratio of gross domestic product (at market prices in millions, chain-linked volumes reference year = 2015) to total employment.

Data on employees and employment are presented according to the domestic concept used in National accounts.

The scoreboard indicator is the percentage change over three years of nominal unit labour cost (NULC), and is calculated using the formula:

[ (ULCt – ULCt-3) / ULCt-3 ] * 100.

The indicative threshold is 9% for the euro area countries and 12% for the non-euro area countries.

The deflated house price index (or real house price index) is the ratio between the house price index (HPI) and the national accounts deflator for private final consumption expenditure (households and non-profit institutions serving households (NPIs)). This indicator therefore measures inflation in the house market relative to inflation in the final consumption expenditure of households and NPIs.

Eurostat HPI captures price changes of all residential properties purchased by households (flats, detached houses, terraced houses, etc.), both new and existing, independently of their final use and their previous owners. Only market prices are considered, self-build dwellings are therefore excluded. The land component is included.

The scoreboard indicator is the year-on-year growth rate of the deflated house price index (reference year 2015 = 100), and is calculated using the formula:

[ ( (HPIt / DEFLt ) – (HPIt-1 / DEFLt-1) ) / (HPIt-1 / DEFLt-1) ] * 100.

The indicative threshold is 6%.

The private sector credit flow represents the net amount of liabilities that have incurred in the sectors non-financial corporations (S.11) and households and non-profit institutions serving households (S.14_S.15) along the year. The instruments that are taken into account to compile private sector credit flow are debt securities (F.3) and loans (F.4).

Data are presented in consolidated terms, i.e. data do not take into account transactions within the same sector. Definitions regarding sectors and instruments are based on the ESA 2010. It is the flow counterpart of private sector debt (which is a stock indicator).

The MIP scoreboard indicator is expressed in % of GDP. The formula is:

[ PSCFt ;/ GDPt ] * 100.

The indicative threshold of private sector credit flow is 14%.

The private sector debt is the stock of liabilities held by the sectors non-financial corporations (S.11) and households and non-profit institutions serving households (S.14_S.15). The instruments taken into account to compile private sector debt are debt securities (F.3) and loans (F.4).

Data are presented in consolidated terms, i.e. do not taking into account transactions within the same sector. Definitions regarding sectors and instruments are based on the ESA 2010.

The MIP scoreboard indicator is the stock of private sector debt in percentage of GDP, and is calculated as:

[ PSDt ;/ GDPt ] * 100.

The indicative threshold of private sector debt is 133%.

For the purpose of the 'Excessive Deficit Procedure' (EDP) in the 'Economic and Monetary Union' (EMU), as well as for the 'Growth and Stability Pact', the current Protocol 12, annexed to the 2012 consolidated version of the 'Treaty on the Functioning of the European Union', provides a complete definition of government debt: "debt means total gross debt at nominal value outstanding at the end of the year and consolidated between and within the sectors of general government".

This definition is supplemented by Council Regulation (EC) No 479/2009, as amended by the Commission Regulation (EU) No 220/2014 (which has only updated references to ESA2010 instruments) specifying the components of government debt with reference to the definitions of financial liabilities in ESA2010.

In this context, the stock of government debt in the excessive deficit procedure (EDP debt) is equal to the sum of liabilities, at the end of year, of all units classified within the general government sector (S.13) in the following categories: currency and deposits (F.2), debt securities (F.3) and loans (F.4).

Basic data are expressed in national currency, converted into euro using end-year exchange rates for the euro provided by the European Central Bank (ECB).

The MIP headline indicator is expressed in % of GDP, and is calculated as:

[ GGGDt / GDPt ] * 100.

The indicative threshold is 60% of GDP.

The unemployment rate is the number of unemployed persons as a percentage of the labour force (the total number of people employed and unemployed) based on International Labour Office (ILO) definition. Unemployed persons comprise persons aged 15 to 74 who fulfil all the three following conditions: - were not employed during the reference week; - are available to start work within the next two weeks following the reference week; - have been actively seeking work in the past four weeks preceding the reference week or have already found a job to start within the next three months.

The indicator monitors high and persistent rates of unemployment and helps to better understand the potential severity of macroeconomic imbalances. It points towards a potential misallocation of resources and general lack of adjustment capacity in the economy.

The data source is the quarterly EU Labour Force Survey (EU LFS) covering the resident population in private households.

The MIP scoreboard indicator is the three-year backward moving average, i.e. the data for year T is the arithmetic average of data for years T, T-1 and T-2., and it is calculated as:

[ URt + URt-1 + URt-2 ] / 3.

The indicative threshold is 10%.

The total financial sector liabilities measure the evolution of the sum of all liabilities (which includes currency and deposits, debt securities, loans, equity and investment fund shares/units, insurance, pensions and standardised guarantee schemes, financial derivatives and employee stock options and other accounts payable) of the financial corporations sector. Definitions are based on the ESA2010.

Data are presented in non-consolidated terms, i.e. data take into account transactions within the same sector.

The MIP indicator is expressed as year over year growth rate, with an indicative threshold of 16.5%.

The activity rate is the percentage of economically active population aged 15-64 on the total population of the same age. According to the definitions of the International Labour Organisation (ILO) for the purposes of labour market statistics people are classified as employed, unemployed or economically inactive. The economically active population (also called labour force) is the sum of employed and unemployed persons. Inactive persons are those who, during the reference week, were neither employed nor unemployed.

The data source is the quarterly EU Labour Force Survey (EU LFS) covering the resident population in private households.

The MIP Scoreboard indicator is the three year change in percentage points, with an indicative threshold of - 0.2 pp.

The long-term unemployment rate is the number of persons unemployed for 12 months or longer as a percentage of the labour force (i.e. economically active population). The unemployment rate is the number of unemployed persons as a percentage of the labour force (total number of people employed and unemployed) based on International Labour Office (ILO) definition. Unemployed persons comprise persons aged 15 to 74 who fulfil all the three following conditions: are without work during the reference week; are available to start work within the next two weeks and have been actively seeking work in the past four weeks or have already found a job to start within the next three months.

The data source is the quarterly EU Labour Force Survey (EU LFS) covering the resident population in private households.

The MIP Scoreboard indicator is the three year change in percentage points. The indicative threshold is 0.5 pp.

The youth unemployment rate is the unemployment rate of people aged 15-24 as a percentage of the labour force of the same age group. The unemployment rate is the number of unemployed persons as a percentage of the economically active population (the total number of people employed and unemployed constitute the labour force) based on the International Labour Office (ILO) definition. Unemployed persons comprise persons aged 15 to 74 who fulfil all the three following conditions: are without work during the reference week; are available to start work within the next two weeks and have been actively seeking work in the past four weeks or have already found a job to start within the next three months.

The data source is the quarterly EU Labour Force Survey (EU LFS) covering the resident population in private households.

The MIP Scoreboard indicator is the three year change in percentage points. The indicative threshold is 2.0 pp.