Current account surplus up slightly

Germany’s current account recorded a surplus of €31.4 billion in December 2023, up €0.9 billion on the previous month’s level. While the surplus in the goods account decreased, the surplus in invisible current transactions, which comprise services as well as primary and secondary income, experienced a stronger increase. 

In December, the surplus in the goods account fell by €7.6 billion to €16.5 billion because receipts recorded a sharper decline than expenditure. 

The surplus in invisible current transactions went up by €8.5 billion to €14.9 billion, mainly because net receipts in primary income expanded by €6.4 billion to €21.9 billion. This was first and foremost attributable to higher revenue from the EU’s agricultural subsidies, which were paid out towards the end of the year as is standard practice. Another factor was an increase in residents’ income from their investments in investment fund shares and from other investment income. In addition, the services account, which had still shown a deficit in November amounting to €2.9 billion, was now broadly balanced. This was primarily due to lower net expenditure on other business services and travel, as well as a shift into net receipts in telecommunications, computer and information services. By contrast, the deficit in the secondary income account expanded slightly by €0.8 billion to €7.1 billion. Here, expenditure rose more sharply than receipts. The fact that the increase in general government expenditure on current transfers relating to international cooperation outweighed the decrease in general government payments to the EU budget in connection with financing related to gross national income made a contribution to the rise in overall expenditure.

Portfolio investment sees net capital exports

In December, activity in the international financial markets was shaped by greater confidence among market players that global inflation could recede faster than previously anticipated. Germany’s cross-border portfolio investment recorded net capital exports of €17.6 billion, after net capital imports of €6.0 billion in November. The crucial factor here was that German investors stepped up their holdings of foreign securities, while non-resident investors scaled back their holdings of German paper. German investors added foreign securities worth €7.7 billion to their portfolios on balance. They mainly acquired foreign bonds (€6.6 billion), mutual fund shares (€1.1 billion) and money market paper (€0.6 billion). By contrast, they disposed of a small volume of mutual fund shares (€0.5 billion). Foreign investors parted with German securities worth €9.8 billion net; on balance, this was due exclusively to bonds maturing and bonds being sold (€16.9 billion). Meanwhile, in net terms, they acquired German money market paper (€4.7 billion), shares (€1.6 billion) and mutual fund shares (€0.8 billion). 

In December, transactions in financial derivatives resulted in net inflows of €3.9 billion (after €1.6 billion in November). 

Direct investment generated net capital exports of €3.8 billion in December, down from €15.7 billion in November. Viewed in terms of transactions, German foreign direct investment rose by €9.7 billion. German enterprises stepped up their equity capital abroad by €4.8 billion, granting additional intra-group loans amounting to almost the same figure (€4.9 billion) on balance. Foreign enterprises likewise provided their German affiliates with additional direct investment funds (€5.9 billion), boosting their equity capital by €2.6 billion and expanding the volume of loans by €3.3 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 outflows of capital amounting to €19.8 billion in December (following €23.0 billion in November). Monetary financial institutions excluding the Bundesbank made a major contribution here (€75.0 billion). The Bundesbank, on the other hand, recorded net capital imports of €47.1 billion. The TARGET balance rose by €33.3 billion, but this was offset by higher deposits from non-residents – especially investors from outside the euro area. This pattern is often observed towards the end of the year. Transactions by general government produced net capital exports of €10.7 billion, while enterprises and individuals recorded net capital imports in other investment (€18.8 billion).

The Bundesbank’s reserve assets declined – at transaction values – by €0.6 billion in December.

Preliminary annual figures for the balance of payments

According to the balance of payments data available so far, Germany’s current account surplus rose to €280.3 billion in 2023 (from €170.9 billion in 2022). All sub-accounts of the financial account recorded net capital exports; these came to €290.4 billion in total. Viewed in terms of transactions, net financial assets increased most strongly in other investment (€143.8 billion), followed by direct investment (€94.1 billion), financial derivatives (€43.8 billion), portfolio investment (€7.8 billion) and reserve assets (€0.9 billion).

The final year-end figures for the balance of payments will be published and analysed in greater detail in the March 2024 Monthly Report.