German balance of payments in January 2022

Current account surplus narrows considerably

Germany’s current account recorded a surplus of €11.0 billion in January 2022, down €13.6 billion on the previous month’s level. The surplus in the goods account declined considerably, with the surplus in invisible current transactions, which comprise services as well as primary and secondary income, contracting even more strongly.

In January, the surplus in the goods account fell by €4.3 billion on the month to €4.5 billion because receipts recorded a sharper decrease than expenditure.

The surplus in invisible current transactions declined by €9.3 billion to €6.5 billion in January 2022, owing to lower results in all three sub-accounts. The surplus of €1.5 billion in the services account in December 2021 turned into a deficit of €0.3 billion in the reporting month. Receipts recorded a stronger decline than expenditure, especially in the context of charges for the use of intellectual property, other business services and computer services. Net receipts in primary income fell by €5.3 billion to €12.8 billion, with the revenue side showing a particular decline following the payment of EU’s agricultural subsidies to Germany in December 2021. In addition, the secondary income deficit rose by €2.2 billion to €6.1 billion, notably on account of lower general government revenue from current taxes on income and wealth of non-residents.

Portfolio investment sees outflows

In January 2022, events in the international financial markets were shaped by rising yields linked to persistently high inflation rates and expectations that the major central banks would take further steps towards normalising monetary policy. Germany’s cross-border portfolio investment generated net capital exports of €27.2 billion (December 2021: €34.0 billion). Domestic investors added, on balance, €33.4 billion worth of securities issued by non-residents to their portfolios, purchasing bonds (€19.5 billion), mutual fund shares (€6.5 billion), shares (€4.9 billion) and money market paper (€2.5 billion). Non-resident investors acquired German securities to the tune of €6.1 billion net. They purchased bonds (€13.8 billion) and mutual fund shares (€0.6 billion), while offloading money market paper (€4.7 billion) and shares (€3.6 billion).

In January, the balance of financial derivatives recorded net outflows (€12.5 billion). These were linked to the issuance of structured securities in Germany.

Direct investment generated net capital imports of €3.8 billion in January (December: net capital exports of €6.7 billion). Non-resident enterprises injected their affiliated enterprises in Germany with direct investment funds worth €30.7 billion net. They increased their equity capital in German enterprises by €2.4 billion and granted intra-group loans in the amount of €28.4 billion. Conversely, domestic enterprises stepped up their foreign direct investment by €27.0 billion. They supplied foreign branches with additional equity capital of €10.5 billion, just over half of which took the form of reinvested earnings. Furthermore, they issued intra-group loans in the amount of €16.5 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 €27.7 billion in January (following net capital imports of €24.9 billion in December). The Bundesbank’s net claims grew by €89.4 billion. Although its TARGET2 claims declined by €110.8 billion, its liabilities from deposits by non-euro area residents fell even more sharply. Monetary financial institutions (excluding the Bundesbank) recorded net capital imports (€98.3 billion). Large-volume transactions of this kind with non-residents are not unusual at the beginning of the year; they mirror the countervailing transactions at the end of the year. Transactions by enterprises and households (€30.3 billion) and by general government (€6.2 billion) also led to net outflows of funds abroad.

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