Sharp decrease in current account surplus

Germany’s current account recorded a surplus of €16.2 billion in January 2023, down €9.4 billion on the previous month’s level. This was attributable to a decline in the goods account surplus and in the invisible current transactions balance, in particular, which comprises services as well as primary and secondary income.

In January, the surplus in the goods account fell by €1.0 billion to €9.9 billion because receipts recorded a sharper decline than expenditure. 

The surplus in invisible current transactions decreased by €8.5 billion to €6.3 billion. This was mainly because net receipts in primary income contracted by €8.4 billion to €12.8 billion. Lower revenue following the payment of the EU’s agricultural subsidies to Germany in December 2022 made a particular contribution to this decrease. In addition, receipts from investment income fell. The surplus of €1.4 billion in the services account in December 2022 turned into a deficit of the same amount in the reporting month. Receipts fell more sharply than expenditure, mainly in the area of charges for the use of intellectual property, computer services and other business services. By contrast, the deficit in the secondary income account narrowed by €2.7 billion to €5.1 billion. Although receipts declined, expenditure fell more sharply, with lower general government expenditure on current transfers relating to international cooperation playing a particular role.

Portfolio investment sees net capital exports

In January 2023, financial markets showed an increasing appetite for risk owing to the brighter economic outlook. Germany’s cross-border portfolio investment generated net capital exports of €24.3 billion (December: €52.5 billion). German investors increased their holdings of foreign securities by €39.8 billion, purchasing bonds (€24.5 billion), money market paper (€6.1 billion), mutual fund shares (€4.9 billion) and shares (€4.3 billion). Conversely, foreign investors purchased German securities on balance (€15.5 billion). They added bonds (€23.0 billion) and a small volume of shares (€0.3 billion) and mutual fund shares (€0.2 billion) to their portfolios, but sold money market paper (€8.0 billion).

In January, transactions in financial derivatives recorded outflows of €8.3 billion (December: inflows of €10.1 billion). 

Direct investment recorded net capital exports of €14.5 billion in January (December: €26.4 billion). Foreign enterprises decreased their direct investment in Germany by €21.9 billion. This was attributable to net redemptions in intra-group lending (€25.4 billion), predominantly in financial loans. By contrast, foreign companies injected their affiliates in Germany with additional equity capital (€3.5 billion), with reinvested earnings playing an important role. In the opposite direction, German enterprises likewise scaled back their foreign direct investment by €7.4 billion, reducing the volume of both trade credits (€9.7 billion) and financial loans (€3.6 billion) to business units abroad. By comparison, they stepped up their equity capital in affiliates abroad by €5.9 billion, almost exclusively by reinvesting earnings.

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 €29.9 billion in January (December: €4.9 billion). The net external claims of monetary financial institutions excluding the Bundesbank fell by €68.4 billion, while those of the Bundesbank increased by €11.2 billion. TARGET2 claims on the ECB fell by €106.7 billion. At the same time, however, deposits – mainly from non-euro area residents – also decreased. Enterprises and households (€18.2 billion) and general government (€9.1 billion) also recorded net capital exports.

The Bundesbank’s reserve assets went down – at transaction values – by €0.3 billion in January.