Steep rise in current account surplus

Germany’s current account recorded a surplus of €32.4 billion in March 2023, up €9.9 billion on the previous month’s level. This was chiefly attributable to a larger goods account surplus. In addition, the surplus in invisible current transactions, which comprise services as well as primary and secondary income, rose. 

In March, the surplus in the goods account grew by €8.8 billion on the month to €27.3 billion because receipts recorded a steeper increase than expenditure. 

The surplus in invisible current transactions went up by €1.1 billion to €5.1 billion, essentially because net receipts in primary income expanded by €3.5 billion to €15.7 billion. Receipts expanded mainly as a result of residents’ higher revenue from portfolio investment. Moreover, expenditure fell, with lower dividend payments to non-residents playing a major role. By contrast, the deficit in secondary income widened by €1.4 billion to €7.4 billion, substantially owing to higher net non-government expenditure. This was mainly due to the net transfer by the Bundesbank to the Eurosystem pool as part of the redistribution of monetary income.^[1] Moreover, the deficit in the services account widened by €1.0 billion to €3.2 billion. Receipts increased overall. This was due above all to higher revenue from charges for the use of intellectual property, other business services and transport services. However, expenditure rose even more sharply, mainly off the back of increased spending on other business-related services and travel.

Portfolio investment sees net capital imports

In March, financial markets were characterised by persistently high inflation rates in the euro area, a further significant policy rate hike by the Governing Council of the ECB and temporary concerns about a US banking crisis. Germany’s cross-border portfolio investment recorded net capital imports of €20.3 billion (after net capital exports of €19.5 billion in February). Foreign investors increased their holdings of German securities by €38.7 billion, purchasing – in particular, public – bonds (€21.2 billion) and money market paper (€19.8 billion). By contrast, they parted with shares (€2.0 billion) and mutual fund shares (€0.3 billion). Domestic investors acquired foreign securities worth €18.4 billion, focusing mainly on bonds (€19.4 billion). To a lesser extent, they also invested in mutual fund shares (€1.6 billion) and money market paper (€0.3 billion), but sold shares (€2.9 billion). 

In March, transactions in financial derivatives recorded outflows of €3.0 billion (February: outflows of €8.2 billion). 

Direct investment recorded net capital exports of €20.9 billion in March (February: €19.0 billion). German enterprises increased their direct investment capital abroad by €16.4 billion. They injected their foreign affiliates with additional equity capital (€14.0 billion), with reinvested earnings accounting for more than half of this volume. They also granted additional intra-group loans (€2.3 billion), with the increase in trade credits outweighing the decrease in financial credits. Conversely, foreign direct investors withdrew €4.5 billion from Germany. They reduced the volume of credit to business units in Germany (€6.1 billion). Here, financial credits showed an even sharper decline. However, foreign affiliates expanded their trade credits to Germany. They stepped up their equity capital in enterprises in Germany by €1.6 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 exports amounting to €53.1 billion in March (following net capital imports of €16.5 billion in February). The net external claims of monetary financial institutions excluding the Bundesbank rose by €31.5 billion, while those of the Bundesbank increased by €5.3 billion. TARGET claims on the ECB rose by €55.7 billion; deposits – mainly from non-euro area residents – also expanded at the same time. Enterprises and households as well as general government also recorded net capital exports (€15.5 billion and €0.9 billion, respectively).

The Bundesbank’s reserve assets rose – at transaction values – by €0.4 billion in March.

Footnotes:

1. These transactions are published in the Bundesbank’s Annual Report, which covers the financial year just ended. See Deutsche Bundesbank (2023), Annual Report 2022, p. 65. These transactions are usually recorded in the balance of payments in the month in which the Annual Report is published. In 2023, this occurred in March.