German balance of payments in March 2022

Decrease in current account surplus

The German current account recorded a surplus of €18.8 billion in March 2022, down €2.3 billion on the previous month’s level. The result was chiefly driven by a smaller goods account surplus. Conversely, the surplus in invisible current transactions, which comprise services as well as primary and secondary income, grew slightly.

In March, the surplus in the goods account fell by €2.8 billion on the month to €12.8 billion because expenditure recorded a sharper increase than receipts.

The surplus in invisible current transactions stood at €5.9 billion in March 2022, compared with €5.4 billion one month earlier. The narrow surplus of €0.4 billion in the services account in February 2022 turned into a deficit of €2.5 billion. On the whole, expenditure grew more strongly than receipts, with other business services and travel making a considerable contribution. By contrast, net receipts in primary income rose by €3.0 billion to €13.4 billion. This was attributable to the lower expenditure arising from dividend payments to non-residents for portfolio investment. Moreover, the deficit in the secondary income account decreased slightly by €0.5 billion to €4.9 billion. The main reason for this was the lower net expenditure by general government, partly due to the higher revenue on current transfers relating to international cooperation and especially the decrease in payments to the EU budget in connection with financing related to gross national income.

Portfolio investment sees outflows

In March 2022, financial markets continued to be influenced by Russia’s invasion of Ukraine and rising inflation rates. Germany’s cross-border portfolio investment generated net capital exports of €16.9 billion (February: net capital imports of €8.3 billion). Domestic investors acquired foreign securities worth €26.0 billion. They purchased bonds – on balance denominated exclusively in euro – to the tune of €17.4 billion. They also added shares (€7.9 billion) and money market paper (€2.0 billion) to their portfolios, but disposed of mutual fund shares (€1.2 billion). Non-resident investors acquired German securities worth €9.1 billion overall, purchasing money market paper (€11.2 billion) as well as bonds (€5.2 billion). There was primarily demand for debt securities issued by the public sector, which are considered to be safe investments in periods of high uncertainty. By contrast, non-resident investors divested themselves of German shares (€4.7 billion) and mutual fund shares (€2.6 billion) in net terms.

In March, the balance of financial derivatives recorded net inflows (€6.9 billion).

Direct investment generated net capital imports of €3.8 billion in March (February: net capital exports of €14.6 billion). Non-resident enterprises injected their affiliates in Germany with direct investment funds totalling €4.7 billion, boosting equity capital by €0.8 billion and granting additional loans amounting to €3.9 billion on balance. Conversely, German enterprises stepped up their foreign direct investment by €0.9 billion, raising equity capital by €8.1 billion, primarily in the form of reinvested earnings. By contrast, redemptions predominated in intra-group lending (€7.2 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 outflows of capital amounting to €2.5 billion in March (following €16.8 billion in February). This was attributable to a rise in the net external assets of enterprises and households (€21.6 billion). Other sectors of the economy recorded net inflows of capital. For example, the Bundesbank’s net claims declined by €13.5 billion. While its TARGET2 claims grew by €20.2 billion, the deposits of non-euro area residents also increased, which is not unusual at the end of a quarter. Monetary financial institutions (excluding the Bundesbank) recorded net capital imports of €1.3 billion and general government also registered a rise in its net external liabilities in other investment (€4.3 billion).

The Bundesbank’s reserve assets rose – at transaction values – by €0.7 billion in March.