Current account surplus down

Germany’s current account recorded a surplus of €27.6 billion in March 2024, down €1.1 billion on the previous month’s level. This was mainly attributable to a lower surplus in invisible current transactions, which comprise services as well as primary and secondary income.

In March, the surplus in the goods account grew by €0.4 billion on the month to €27.5 billion because receipts recorded a steeper increase than expenditure. The surplus in invisible current transactions contracted by €1.5 billion to €0.2 billion. The crucial factor here was that the deficit in secondary income widened by €5.3 billion to €10.1 billion, primarily owing to higher net non-government expenditure. This was chiefly 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 increased by €0.7 billion to €4.5 billion. Receipts increased overall, which was attributable first and foremost to revenue from charges for the use of intellectual property, research and development and other business services. Nevertheless, there was stronger growth in expenditure, mainly off the back of increased spending on other business services and travel. By contrast, net receipts on primary income went up by €4.5 billion to €14.8 billion. Receipts expanded primarily as a result of residents’ higher income from portfolio investment. Expenditure also declined, chiefly owing to lower dividend payments made to non-residents.

Portfolio investment sees net capital exports

In March, international financial markets were largely shaped by economic developments and expectations regarding monetary policy in the United States: economic activity remained robust there, but the unexpectedly slow decrease in inflation made any imminent, significant relaxation of monetary policy seem more unlikely. Germany’s cross-border portfolio investment recorded net capital exports of €7.5 billion, after net capital imports of €5.3 billion in February. Investors in Germany acquired €28.3 billion net worth of foreign securities, investing in securities of all asset classes: bonds (€19.9 billion), mutual fund shares (€5.0 billion), money market paper (€1.9 billion) and shares (€1.5 billion). Non-resident investors added German securities worth €20.7 billion net to their portfolios, purchasing bonds on a larger scale (€16.4 billion), mostly public bonds. They also bought money market paper (€5.8 billion) and mutual fund shares (€0.4 billion). By contrast, they disposed of shares to the tune of €1.9 billion on balance. 

In March, transactions in financial derivatives resulted in net inflows of €2.3 billion (after outflows of €5.4 billion in February). 

Direct investment recorded net capital exports of €12.7 billion in March (February: net capital imports of €0.5 billion). Viewed in terms of transactions, German foreign direct investment rose by €16.1 billion. German firms reduced their equity capital abroad slightly by €0.1 billion, but provided affiliated enterprises abroad with additional financial loans and trade credits (€16.2 billion in total). Foreign enterprises provided their German affiliates with direct investment funds (€3.4 billion), boosting both their equity capital (€1.0 billion) and the volume of loans (€2.5 billion) on balance.

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 €9.2 billion in March (following €7.4 billion in February). Higher net claims of enterprises and households (€11.8 billion) made a notable contribution to this amount. The Bundesbank’s net claims rose by €3.2 billion even though TARGET claims on the ECB decreased by €9.8 billion. The Bundesbank’s liabilities in the form of cash and foreign deposits declined even more sharply, however. Monetary financial institutions excluding the Bundesbank recorded net capital imports of €1.2 billion in March in the other investment account. Transactions by general government resulted in net capital imports as well (€4.6 billion).

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

Footnote:

1. These transactions are published in the Bundesbank’s Annual Report, which covers the financial year just ended. See Deutsche Bundesbank (2024), Annual Report 2023, p. 71. These transactions are usually recorded in the balance of payments in the month in which the Annual Report is published. In 2024, this occurred in March.