Current account of the balance of payments
The current account of the balance of payments shows the value of Denmark’s economic transactions with the rest of the world, which directly affect disposable income and, accordingly, the consumption of goods and services.
The current account of the balance of payments includes transactions that have been completed in the accounting period, and which directly affect disposable income and, accordingly, the consumption of goods and services.
The current account is divided into the items goods, services, compensation of employees and property income as well as current transfers.
In the balance of payments, the value of international trade in goods is stated according to a change of ownership principle (between a Danish and a foreign resident), as opposed to the traditional international trade in goods statistics, which is based mainly on a border crossing principle (the statistics state the value of goods crossing the Danish border). This difference between the two principles for the trade in goods has become increasingly important as the production of goods increasingly takes place across country borders, e.g. due to the international organisation of multinational enterprises.
International trade in services in the balance of payments follows the same principles as international trade in services statistics and is stated in accordance with a change of ownership principle between a Danish and a foreign resident.
In the balance of payments, the item compensation of employees, property income and other income reflects transactions as a result of returns on factors of production and ownership of financial assets. Compensation of employees is especially dominated by cross-border workers who are working in one country and living in another (e.g. employees residing in Sweden and working in Denmark). Transactions as a result of property income predominantly include returns from affiliates and returns on stocks and bonds. Returns as a result of ownership of factors of production and financial assets in Denmark by foreign residents is stated as expenditure, and the returns of Danish residents as a result of ownership of factors of production and financial assets abroad is stated as income.
The item current transfers covers transactions with the rest of the world where no economic value is given as a return. This includes e.g. contributions to and from international institutions, assistance for other countries (e.g. development aid and block grants for Greenland and the Faroe Islands) and pension payments. For Denmark, this is expenditure rather than income.
Except from 1998, Denmark has had a surplus on the current account of the balance of payments since 1990.
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