Rise in current account surplus

Germany’s current account recorded a surplus of €23.9 billion in December 2021, up €5.4 billion on the previous month’s level. The surplus in the goods account declined, but the surplus in invisible current transactions, which comprise services as well as primary and secondary income, increased considerably more strongly.  

In December, the surplus in the goods account fell by €4.1 billion on the month to €9.4 billion because receipts recorded a sharper decrease than expenditure.

The surplus in invisible current transactions grew in December by €9.4 billion to €14.6 billion. The surplus in the services account rose by €1.7 billion to €2.8 billion, also because net expenditure on other business services and computer services decreased and travel expenditure declined on balance. However, the rise in net receipts in primary income by €6.0 billion to €16.2 billion carried the most weight. This was mainly attributable to higher revenue from the EU’s agricultural subsidies, which were paid out towards the end of the year as is standard practice. Moreover, the deficit in the secondary income account narrowed by €1.7 billion to €4.4 billion. In this context, receipts rose, not least on account of an upturn in general government revenue from current taxes on income and wealth of non-residents. In terms of expenditure, the decline in general government payments to the EU budget in connection with financing related to gross national income outpaced the rise in current transfers relating to international cooperation.

Portfolio investment sees outflows

In December 2021, concerns about persistent inflation rates and uncertainty surrounding the future path of monetary policy in the major economies continued to influence the international financial markets. Moreover, as is usual at the end of the year, end-of-month transactions played a role. Germany’s cross-border portfolio investment generated net capital exports of €34.1 billion (November: €32.9 billion). Resident investors expanded their portfolio holdings of foreign securities only slightly, by €0.9 billion. They purchased mutual fund shares (€13.5 billion) and shares (€3.3 billion), while offloading money market paper (€9.3 billion) and bonds (€6.6 billion). Foreign investors disposed of German securities to the tune of €33.1 billion net, selling bonds (€28.7 billion), money market paper (€9.8 billion) and mutual fund shares (€1.3 billion), while making net purchases of shares (€6.7 billion).

In December, the balance of financial derivatives recorded net outflows (€1.4 billion).

Direct investment generated net capital exports of €4.7 billion in December (November: €19.6 billion). Foreign enterprises reduced their direct investment in Germany by €20.8 billion. Although they increased their equity capital in foreign enterprises by €0.4 billion, credit transactions with German group entities were dominated by repayments of previously granted loans (€21.2 billion). In the opposite direction, domestic enterprises also scaled back their foreign direct investment (€16.1 billion). They reduced their equity capital in foreign enterprises by €6.9 billion, partly due to the fact that profit distribution exceeded estimated profits, thus leading to negative reinvested profits. Beyond that, on balance, credit flowed from affiliated enterprises back to Germany (€9.3 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 inflows of capital amounting to €28.3 billion in December (following €20.4 billion in November). The Bundesbank’s net claims declined by €102.6 billion. In this context, higher TARGET2 claims (€133.1 billion) were offset by an even sharper rise in non-resident counterparty deposits from outside the euro area at the Bundesbank. Monetary financial institutions (excluding the Bundesbank) recorded net capital exports (€103.3 billion). Transactions by enterprises and households led to net inflows of funds from abroad (€32.4 billion), while general government recorded net capital exports (€3.5 billion). Stronger cross-border financial flows are quite common towards the end of the year when market participants restructure their balance sheets (for regulatory reasons in some cases).

The Bundesbank’s reserve assets fell slightly – at transaction values – by €1.0 billion in December.

Preliminary annual figures for the balance of payments

According to the balance of payments data currently available, Germany’s current account surplus rose to €247.4 billion in 2021 (from €234.4 billion in the previous year). The financial account posted net capital exports in direct investment (€71.4 billion), securities transactions (€272.4 billion) and financial derivatives (€38.5 billion). By contrast, other investment recorded net capital imports (€145.4 billion).

The year-end figures for the balance of payments will be published and analysed in greater detail in the March 2022 Monthly Report.