Sharp decrease in current account surplus

In April 2021, Germany’s current account recorded a surplus of €21.3 billion, down €8.7 billion on the previous month’s level. This was driven by the decrease in the goods account surplus and a narrowed surplus on invisible current transactions, comprising primary and secondary income as well as services. 

In April, the surplus in the goods account fell by €6.2 billion on the month to €16.7 billion, with goods exports falling more sharply than imports.

The surplus in invisible current transactions fell by €2.5 billion to €4.6 billion in April, largely because net receipts in primary income contracted by €3.8 billion to €6.5 billion. This was particularly driven by higher dividend payments to non-residents for portfolio investments. By contrast, the surplus in services rose slightly by €0.7 billion to €2.1 billion. Expenditure declined more sharply than receipts, which is also because expenditure for other business services and telecommunications, computer and information services decreased more strongly than the income they generated. In addition, the deficit in secondary income fell by €0.6 billion to €3.9 billion, with lower non-government sector expenditure playing a role in particular. 

Portfolio investment sees outflows

In April 2021, developments in the international financial markets continued to be influenced by the coronavirus pandemic, but also by the growth outlook brightening in some areas. It was against this backdrop that Germany’s cross-border portfolio investment recorded net capital exports of €25.4 billion (following net capital imports of €4.9 billion in March). Domestic investors added €15.2 billion worth of securities issued by non-residents to their portfolios. They purchased foreign securities in all asset classes; mainly mutual fund shares (€9.3 billion) but also bonds (€2.6 billion), shares (€2.1 billion) and money market paper (€1.3 billion). They primarily invested in bonds denominated in foreign currencies, while divesting themselves of long-dated euro-denominated securities on balance. Conversely, foreign investors disposed of €10.2 billion net worth of German securities, chiefly reducing their holdings of German debt securities (€9.4 billion), including both bonds (€5.7 billion) and money market paper (€3.8 billion). They sold public sector bonds and acquired long-dated securities issued by private German issuers. Foreign investors sold shares of German enterprises in the amount of €2.4 billion, while stocking up on mutual fund shares in Germany to the tune of €1.6 billion.

In April, financial derivatives again recorded net capital exports: these amounted to €4.7 billion.

Direct investment saw net capital imports of €7.3 billion in April (following net capital exports of €21.7 billion in March). Non-resident investors injected their affiliated enterprises in Germany with direct investment funds worth €7.4 billion net. They increased their equity by €1.6 billion and provided €5.8 billion via intra-group lending. German enterprises made net direct investment flows of €0.1 billion abroad. The increases they made to their equity capital in branches abroad of €5.3 billion were offset by negative net lending to affiliates abroad of roughly the same amount (€5.2 billion).

Other statistically recorded investment – which comprises loans and trade credits (where these do not constitute direct investment), bank deposits and other investments – registered net capital imports amounting to €9.9 billion in April (following net capital exports of €20.5 billion in March). Bundesbank accounts also recorded net capital imports (€14.5 billion). This was caused by a €57.3 billion decrease in TARGET2 claims on the ECB; non-residents’ deposits with the Bundesbank likewise declined, albeit to a lesser extent. Transactions by enterprises and households (€3.1 billion) and by general government (€2.6 billion) also led to net inflows of funds from abroad. Monetary financial institutions (excluding the Bundesbank), on the other hand, recorded net capital exports (€10.3 billion).

The Bundesbank’s reserve assets fell slightly – at transaction values – by €0.3 billion in April.