German balance of payments in September 2020

Sharp rise in current account surplus

Germany’s current account recorded a surplus of €26.3 billion in September 2020, up €9.7 billion from the previous month’s level. This was primarily attributable to a rise in the goods account surplus. On top of this, the surplus in invisible current transactions, which comprise services as well as primary and secondary income, increased.

In September, the surplus in the goods account grew by €8.8 billion on the month to €23.2 billion, with exports of goods expanding much more sharply than imports.

The surplus on invisible current transactions increased by €0.9 billion in September to €3.1 billion, mainly because the deficit in the services account decreased by €2.1 billion to €0.8 billion. While income increased, due in particular to higher receipts from other business services and computer services, expenditure was down slightly; a reduction in travel expenditure, which had risen significantly in August, contributed to this decrease. Net receipts on primary income fell by €1.0 billion to €7.4 billion owing to a slight decline in income, chiefly as a result of lower receipts from investment fund shares. In addition, there was a slight increase in expenditure, which was largely attributable to higher dividend payments to non-residents for portfolio investment. In the secondary income account, the deficit grew slightly by €0.2 billion to €3.4 billion. Although receipts increased due to a rise in government revenue from current taxes on income and wealth of non-residents, expenditure expanded somewhat more sharply, especially due to higher general government payments to the EU budget in connection with financing related to gross national income.

Inflows in portfolio investment

In September 2020, the international capital markets reflected both the absence of further monetary policy decisions in the United States and Europe and an escalation of the COVID-19 pandemic, combined with fears of new constraints on economic activity in individual European countries. It was against this backdrop that Germany’s cross-border portfolio investment recorded net capital imports of €35.1 billion (after €45.5 billion in August). The main reason for this was net demand of €50.5 billion for German securities on the part of foreign investors, who purchased (primarily corporate) bonds (€27.8 billion), money market paper (€22.3 billion) and a small volume of shares (€0.6 billion). Conversely, domestic investors were active abroad (€15.5 billion). Their interest was primarily focused on shares (€6.2 billion) and mutual fund shares (€6.0 billion). In addition, they purchased bonds (€3.9 billion) and sold money market securities on balance (€0.7 billion).

Financial derivatives recorded net capital exports of €5.6 billion in September (August: €9.3 billion).

Direct investment posted net capital imports of €5.7 billion in the reporting month (following outflows totalling €2.3 billion in August). Domestic enterprises decreased their foreign direct investment by €6.9 billion; first, by scaling back intra-group lending (€4.5 billion), and second, by reducing the equity capital of their foreign branches (€2.4 billion). Foreign direct investment stocks in Germany also fell by €1.2 billion as a result of transactions. A key factor here, too, was that foreign companies reduced their intra-group lending (€6.9 billion). By contrast, they stepped up their equity capital in Germany (€5.7 billion).

Other statistically recorded investment, which comprises loans and trade credits (where these do not constitute direct investment), bank deposits and other investment, registered net outflows amounting to €49.0 billion in September (following outflows totalling €70.6 billion in August). The financial activities of non-banks accounted for €32.0 billion; these activities were spread amongst enterprises and individuals (€26.7 billion) and general government (€5.3 billion). The Bundesbank also recorded net capital exports to the tune of €11.0 billion. Here, higher TARGET2 claims (€59.0 billion) were offset by an increase in non-resident counterparty deposits at the Bundesbank. In addition, transactions by credit institutions resulted in outflows of funds (€5.9 billion).

The Bundesbank’s reserve assets fell slightly – at transaction values – by €0.1 billion in September.