German balance of payments in March 2021

Very sharp rise in current account surplus

The German current account recorded a surplus of €30.2 billion in March 2021, up €11.5 billion on the previous month’s level. This was due to a considerable increase in the surplus on invisible current transactions, which comprise not only services but also primary and secondary income, as well as that in the goods account.

In March, the surplus in the goods account increased by €4.9 billion on the month to €23.3 billion, with goods exports outpacing imports.

The surplus on invisible current transactions grew in March by €6.6 billion to €6.9 billion. A prominently significant factor here was that the deficit in the secondary income account fell by €4.3 billion to €4.5 billion. This was largely the result of lower general government payments to the EU budget in connection with financing related to gross national income. In addition, net receipts on primary income rose by €2.4 billion to €10.0 billion. Receipts grew, with an increase in residents’ dividend income from portfolio investments playing a role. Expenditure fell, primarily because dividend payments to non-residents were back down again following an increase in the preceding month. The surplus in the services account remained virtually unchanged at €1.3 billion. Receipts and expenditure grew virtually neck-and-neck; an increase in transport and other business-related services contributed in considerable measure to this growth on both sides of the balance sheet.   

Portfolio investment sees outflows

In March 2021, the continued positive outlook for the economy and growing success in the COVID-19 vaccination campaign shaped developments in the global financial markets. The sustained optimism was reflected, amongst other things, in a global rise in share prices. It was against this backdrop that Germany’s cross-border portfolio investment recorded net capital exports of €9.2 billion (after €40.2 billion in February). Domestic investors added €22.7 billion worth of securities issued by non-residents to their portfolios. They bought bonds (€11.7 billion), shares (€11.0 billion) and mutual fund shares (€2.2 billion) but offloaded money market paper (€2.2 billion). Conversely, foreign investors acquired €13.5 billion net worth of German securities, mainly purchasing money market paper (€14.2 billion) and private sector bonds (€4.1 billion) but also shares (€2.4 billion) and mutual fund shares (€0.8 billion), yet selling off public sector bonds (€8.0 billion).

Financial derivatives recorded net capital exports of €8.0 billion in March, as in the previous month.

Direct investment generated net capital exports of €20.2 billion in March (up from €6.9 billion in February). Domestic enterprises increased their foreign direct investment by €12.3 billion. Although they reduced their equity capital marginally by €1.4 billion, they simultaneously granted €13.6 billion in additional loans to affiliated enterprises. Foreign investors withdrew a net €8.0 billion worth of foreign direct investment from Germany. They increased their equity capital by €1.6 billion but reduced the volume of intra-group loans by €9.6 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 €17.7 billion in March (following net capital imports of €4.1 billion in February). Transactions by enterprises and households (€13.0 billion) and by general government (€2.8 billion) led, on balance, to net capital outflows. The Bundesbank was likewise a net exporter of capital (€7.2 billion). This was caused by a €38.2 billion rise in TARGET2 claims on the ECB, which were only partly offset by an increase in non-residents’ deposits. Monetary financial institutions (excluding the Bundesbank), on the other hand, recorded net capital imports (€5.4 billion).

The Bundesbank’s reserve assets fell slightly – at transaction values – by €0.5 billion in March.