Very steep decline in current account surplus

Germany’s current account recorded a surplus of €8.9 billion in May 2023, down €13.4 billion on the previous month’s level. This was because invisible current transactions, which comprise services as well as primary and secondary income, switched to a deficit. The surplus in the goods account remained virtually unchanged.

In the goods account, the surplus of €16.0 billion was nearly the same as the previous month’s figure of €16.3 billion because receipts expanded by almost as much as expenditure.

Invisible current transactions saw the previous month’s surplus of €6.1 billion switch to a deficit of €7.0 billion in May. This was due to the shift in primary income from net receipts of €14.5 billion to net expenditure of €1.3 billion, largely as a result of higher dividend payments to non-residents for portfolio investment. In addition, the deficit in the services account widened by €2.3 billion to €5.7 billion mainly because of the typical increase in travel expenditure at this time of year. The deficit in the secondary income account, meanwhile, narrowed from €5.1 billion to just €0.1 billion. This was due, in particular, to the increased general government tax revenue from non-residents owing to the higher dividend payments on their portfolio investment.

Portfolio investment sees net capital imports

In May, a brighter economic outlook in the United States and persistently high inflation rates shaped conditions in financial markets. Germany’s cross-border portfolio investment recorded net capital imports of €20.1 billion (April: net capital exports of €22.4 billion), with non-resident investors increasing their holdings of German securities by €35.8 billion. They purchased bonds (€23.1 billion), money market paper (€13.9 billion) and a small amount of mutual fund shares (€0.3 billion), and offloaded shares worth €1.4 billion. German investors were active abroad, too, acquiring securities there to the tune of €15.7 billion. On balance, they added bonds (€15.1 billion), mutual fund shares (€2.0 billion) and money market paper (€0.6 billion) to their portfolios, but disposed of shares (€2.0 billion).

In May, transactions in financial derivatives resulted in outflows of €9.4 billion (April: outflows of €5.3 billion).

Direct investment in May generated net capital imports of €8.6 billion (April: net capital exports of €1.4 billion). German enterprises lowered their foreign direct investment by €7.0 billion, particularly reducing their intra-group lending (€12.4 billion). Loans declined much more sharply than trade credits. In addition, domestic enterprises provided additional equity capital for their foreign affiliates (€5.5 billion). Non-resident enterprises, meanwhile, added €1.6 billion to their direct investment in Germany, and increased their intra-group lending to German affiliates by €2.6 billion. They expanded their loans on balance but lowered the volume of trade credits granted. Moreover, non-resident group parents withdrew equity capital of €1.0 billion from domestic enterprises. 

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 on balance amounting to €29.9 billion in May (April: net capital imports of €40.8 billion). Net external claims of monetary financial institutions excluding the Bundesbank declined by €3.0 billion while those of the Bundesbank rose by €25.5 billion; TARGET claims on the ECB remained virtually unchanged. At the same time, however, deposits with the Bundesbank, which are held mainly by non-euro area residents, fell significantly. Enterprises and households recorded net capital exports (€9.6 billion) and general government net capital imports (€2.2 billion).

The Bundesbank’s reserve assets rose – at transaction values – by €0.1 billion in May.