The balance of payments has gone into deficit for the first time in two and a half years as EU subsidies slow and payments for foreign services increase.

The current account showed a deficit of £486 million (€617 million) in the third quarter of last year as surpluses on merchandise exports were overtaken by deficits on services and transfers.

Exports and imports both continued to increase by more than 20 per cent and in the first nine months of 2000 reached £45.16 million and £29.47 million respectively. The main export growth was in computer services, financial services, operational leasing and royalties and licences.

However, spending on foreign services, which includes management, legal and accounting fees as well as advertising and marketing, increased substantially to £6.39 billion as more was paid to foreign firms. Overall services showed a deficit of £2.95 billion in the third quarter of 2000 compared with £900 million in the corresponding period in 1999, according to the latest data from the Central Statistics Office.

As a result, the current account was in deficit by £486 million in the three months to the end of September compared with a surplus of £236 million in the three months to the end of June and a surplus of £79 million in the corresponding period in 1999.

This was the result of a resumption of income flows out of the State, an increase in profits among multinational firms operation here and hence the repatriation of those funds as well as a reduction in transfers from the EU.

In the first nine months of the year there was a deficit of £171 million compared with a surplus of £167 million a year earlier.

A reversal in EU funding where the State's transfers to the EU exceeded receipts meant a small deficit of £64 million in current transfers in the third quarter.

Inward direct investment in the third quarter was £5.3 billion, with the IFSC accounting for £3.2 billion. Outward direct investment was just under £500 million.

Inward portfolio investments came to almost £20 billion as more money was invested in Irish equities by foreign fund managers.

Tourism and travel receipts reached £845 million making up almost a quarter of all services credits. However, spending by the Irish abroad also jumped considerably reaching £836 million as more people take second and even third holidays abroad.