Rise in current account surplus

Germany’s current account recorded a surplus of €24.3 billion in December 2022, up €6.9 billion on the previous month’s level. While the surplus in the goods account actually decreased, the surplus in invisible current transactions, which comprise services as well as primary and secondary income, experienced a considerably stronger increase.

In December, the surplus in the goods account fell by €1.1 billion to €12.2 billion because receipts recorded a sharper decline than expenditure.

The surplus on invisible current transactions went up by €7.9 billion to €12.1 billion. This was mainly because net receipts in primary income expanded by €6.5 billion to €19.1 billion. Higher revenue from the EU’s agricultural subsidies, which were paid out towards the end of the year as is standard practice, made a particular contribution to this increase. In addition, the services account, which had showed a deficit of €1.8 billion in November, was now broadly balanced (-€0.3 billion). This was primarily attributable to lower net expenditure on other business services and travel as well as higher net receipts from charges for the use of intellectual property. The deficit in the secondary income account remained virtually unchanged at €6.7 billion.

Portfolio investment sees net capital exports

In December 2022, financial markets were dominated by the continued tightening of monetary policy in the major economies. Germany’s cross-border portfolio investment generated net capital exports of €47.6 billion (November: net capital imports of €40.8 billion). Foreign investors decreased their holdings of German securities by €37.9 billion, mainly selling bonds (€20.2 billion), money market paper (€17.4 billion) and, to a lesser extent, shares (€1.4 billion). By contrast, they acquired mutual fund shares of German enterprises to the tune of €1.2 billion. Conversely, German investors purchased foreign securities on balance (€9.7 billion), adding mutual fund shares (€15.4 billion) and money market paper (€9.1 billion) to their portfolios, whilst offloading bonds (€9.5 billion) and shares (€5.3 billion).

In December, transactions in financial derivatives recorded inflows of €10.6 billion (November: outflows of €2.6 billion).

Direct investment generated net capital exports of €26.0 billion in December (November: net capital imports of €15.9 billion). Foreign enterprises decreased their direct investment in Germany by €32.9 billion. This was attributable to net redemptions in intra-group lending (€33.8 billion), predominantly in financial loans. By contrast, foreign companies injected their affiliates in Germany with additional equity capital (€0.9 billion). In the opposite direction, German enterprises likewise scaled back their foreign direct investment by €6.9 billion. They decreased the volume of financial loans to business units abroad (€14.1 billion), but topped up trade credits (€7.6 billion). They also reduced their equity capital in affiliates abroad slightly by €0.4 billion. This decline was due to negative reinvested earnings as profit distributions exceeded the profits gained.

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 €5.3 billion in December (following net capital exports of €33.8 billion in November). The Bundesbank’s net external claims declined by €67.5 billion. Although TARGET2 claims on the ECB rose by €35.1 billion, deposits – mainly from non-euro area residents – also expanded by €109.7 billion at the same time. Furthermore, enterprises and households experienced inflows of funds (€10.4 billion). However, there was an increase in the net claims of monetary financial institutions excluding the Bundesbank (€67.8 billion) and general government (€4.8 billion).

The Bundesbank’s reserve assets went down – at transaction values – by €0.3 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 contracted to €145.1 billion in 2022 (from €265.0 billion in the previous year). The financial account posted net capital exports in direct investment (€96.4 billion), portfolio transactions (€43.6 billion), financial derivatives (€34.4 billion) and other investment (€38.2 billion).

The final year-end figures for the balance of payments will be published and analysed in greater detail in the March 2023 Monthly Report.