International investment position
Net external assets are rising again: although they increased slightly by €22 billion in the second quarter, they were not able to recoup the decline of €76 billion triggered by the coronavirus in the previous quarter. At €2.4 trillion or 71.6% of gross domestic product (GDP), the figures for mid-2020 thus remain below those at year-end 2019. For the current quarter, valuation effects (including financial derivatives) led to an increase of €5 billion, whereas in the previous quarter the pandemic had caused valuation losses of almost €100 billion.
Gross claims climbed past the €10 trillion threshold for the first time. Despite the weak net growth over the course of the year so far, gross figures on both sides of the i.i.p. increased sharply again. As a result, Germany’s gross claims on non-residents have passed the €10 trillion mark for the first time, with liabilities amounting to €7.6 trillion. Germany’s external assets and liabilities currently thus add up to more than five times its GDP. This ratio, which is also used to describe an economy’s financial openness, is therefore approaching a new record high.
The renewed uptick in the TARGET2 balance, the hundreds of billions added to non-residents’ deposits at German MFIs, and the unusually high level of foreign interest in short-term public sector debt securities are striking developments that could be linked to the coronavirus pandemic
An economy’s international investment position (i.i.p.) captures the marked-to-market financial assets and liabilities of residents vis-à-vis non-residents at the end of each quarter. Thus, the i.i.p. provides information not only on the volume and structure of financial assets held abroad by residents, but also on those held in Germany by non-residents. The net i.i.p. as a percentage of GDP is a key indicator in the EU’s macroeconomic imbalance procedure (MIP).