Sharp decrease in current account surplus

Germany’s current account recorded a surplus of €13.1 billion in May 2021, down €7.9 billion on the previous month’s level. In addition to the declining surplus in the goods account, the main reason for this decrease was the balance in invisible current transactions, which comprise primary and secondary income as well as services, switching from a surplus to a deficit. 

In May, the surplus in the goods account fell by €1.1 billion on the month to €14.4 billion, with the exports of goods dipping somewhat, while goods imports remained virtually unchanged from the level in April.

The balance in invisible current transactions changed from the surplus in April, falling by €6.8 billion to a deficit of €1.3 billion, largely because the net position in primary income contracted by €6.7 billion to a slight deficit of €0.1 billion. This was particularly driven by higher dividend payments to non-residents for portfolio investment. In May, the surplus in the services account narrowed as well, albeit to a lesser extent, falling by €1.6 billion to €1.2 billion. Receipts were down in various sub-items such as other business services. By contrast, the secondary income deficit shrank by €1.4 billion to €2.4 billion, with general government revenue from current taxes on income and wealth increasing in particular.   

Portfolio investment sees outflows

In May 2021, developments in the international financial markets were influenced by a brightening growth outlook in conjunction with rising inflation expectations. It was against this backdrop that Germany’s cross-border portfolio investment recorded net capital exports of €2.9 billion (after €25.9 billion in April). Domestic investors added €8.1 billion worth of securities issued by non-residents to their portfolios. They acquired bonds (€4.9 billion), mutual fund shares (€4.7 billion) and shares (€1.6 billion) but offloaded money market paper (€3.2 billion). Conversely, foreign investors purchased German securities in all asset classes amounting to €5.2 billion in total. They mainly invested in money market paper (€3.0 billion) and bonds (€1.1 billion) but also stocked up on shares (€0.7 billion) and mutual fund shares (€0.3 billion).

In May, financial derivatives again recorded net capital exports: these amounted to €3.6 billion.

Direct investment generated net capital imports of €1.8 billion in May (up from €0.1 billion in April). Non-resident investors injected their affiliated enterprises in Germany with direct investment funds worth €4.7 billion net. They increased their equity by €1.2 billion and provided €3.4 billion via intra-group lending. German enterprises made net direct investment flows of €2.9 billion abroad. The increases they made to their equity in branches abroad of €5.2 billion were partly offset by repayments to affiliates abroad (€2.3 billion) for loans they had received previously.

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 amounting to €1.8 billion in May (following inflows totalling €9.2 billion in April). Bundesbank accounts also recorded net capital exports (€35.3 billion). This was attributable to the €52.2 billion increase in TARGET2 claims on the ECB; non-residents’ deposits with the Bundesbank likewise rose, albeit to a lesser extent. Monetary financial institutions (excluding the Bundesbank) recorded net capital imports (€31.8 billion), as did general government (€1.7 billion). Cross-border transactions by enterprises and households offset each other on balance.

The Bundesbank’s reserve assets grew slightly – at transaction values – by €0.2 billion in May.