Germany’s external assets grew again in 2018, standing at €2,073 billion at the end of the year. As a percentage of gross domestic product, the balance of Germany’s claims on and liabilities to other countries thus rose from 54% to 62%. “This rise was fuelled, in particular, by net capital exports (€229 billion) and primarily reflected the current account surplus of the previous year,” the Bundesbank press release reported.

Data on external assets are recorded in the international investment position. This captures Germany’s assets and liabilities vis-à-vis non-residents at the end of a reporting period. As a measure of holdings at a given point in time, the international investment position complements the balance of payments, which captures the values of all economic transactions between residents and non-residents over a given period.

Decrease in holdings of foreign securities

In the case of portfolio investment, assets exceeded the corresponding liabilities by €548 billion. This was mainly because of a significantly stronger decrease in securities liabilities than in the corresponding claims.

At the end of 2018, resident investors held foreign securities worth €2,881 billion, representing a year-on-year decline of 1.8%. This was not down to a lack of demand, the Bundesbank experts explain. Instead, negative price changes for investment fund shares and equities meant that claims arising from investment fund shares (€43 billion) as well as those from holdings of foreign equities (€30 billion) declined.

Foreign investors also scaled back their investment in German securities in 2018. At the end of 2018, they held €2,333 billion worth of German securities, a total decrease of 8.5% on the year. “The strong decline was mainly a reflection of revised valuation methods, which caused holdings to shrink by €174 billion,” the Bundesbank press release states. Falling market prices reportedly led to valuation losses in all asset classes.

More foreign direct investment

Germany’s outward foreign direct investment grew by 7% on the year to €2,109 billion. According to the Bundesbank, this increase was mainly attributable to transactions (€133 billion). Inward foreign direct investment in Germany rose by 6% in 2018, and came to a total of €1,493 billion.

Germany’s surplus also rose in other investment, which includes loans and trade credits as well as currency and deposits. The increase of €62 billion, which took the total to €756 billion, was primarily down to the higher net claims of monetary financial institutions (excluding the Bundesbank) on non-residents.