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Current account surplus revised sharply downwards


The Dutch current account balance has been revised downwards for the period 2015-2021 following recent research by Statistics Netherlands on the profits of multinational corporations. According to DNB figures, the current account balance was €7.5 billion in the second quarter of 2022, which is significantly lower than the figure of €18.7 billion (after revision) of a year earlier.  

Published: 23 September 2022

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The current account balance has been revised downwards by about €13.2 billion a year for the period 2015-2021. This adjustment reduces the current account surplus relative to GDP from 8.4% to 6.4% in 2021 (based on three-year averages, see chart).  

For years, there has been a great deal of international attention for the Dutch current account surplus, which is significantly higher than in other EU Member States, and well above the 6% standard set by the European Commission as part of the Macroeconomic Imbalance Procedure (MIP). The MIP was instituted in response to the euro crisis in 2011. It aims to identify potential macroeconomic imbalances that could adversely affect the EU economy or the euro. As a result of the adjustment, the Dutch current account balance has now moved significantly closer to this standard.  

Source: DNB statistics

At De Nederlandsche Bank, we independently compile statistics on the Dutch financial sector and economy. This article is based on these statistics. More information on our statistics and all dashboards can be found on our Statistics homepage.

Research on profits of multinational corporations leads to downward adjustment 

Recent research by Statistics Netherlands (CBS) reveals multiple reasons for the overestimation of the current account balance. One of the main reasons is related to a structural underestimation of the number of foreign-owned companies in the Netherlands. Increasing globalisation is causing the structures of multinational corporations to become more and more complex. Precise information on the actual ownership of companies is often unavailable, and many companies have wrongly been classified as Dutch-owned as a consequence. This has resulted in an underestimation of corporate profits distributed to the rest of the world and thus an overestimation of the current account balance.  

Another main reason relates to methodological adjustments in accounting for retained earnings. This presents a challenge because the concept of earnings as used in the balance of payments differs from the way this concept appears in companies' profit and loss accounts. Alongside distributed corporate earnings, the balance of payments also includes the remaining (retained) part of earnings used for other purposes in the company, e.g. to boost equity or to finance investment. Further analysis shows that the retained earnings of many foreign-owned subsidiaries were higher than initially estimated partly because R&D expenses are often incorrectly recorded as operating costs (rather than as retained earnings). 


Current account balance falls in second quarter  

The current and capital accounts of the balance of payments showed significant developments in the second quarter of 2022. For instance, the current account balance was €7.5 billion, down €11.3 billion from the same period a year earlier. The decline is mainly due to a €9.9 billion decrease in the balance of primary income, sparked by increasing earnings distributions to multinationals with foreign parents and rising dividend distributions.  

The total value of Dutch trade with foreign countries continues to rise. Exports rose to EUR 219 billion (up +27% from a year earlier) and the value of imports to €199 billion (up +32%). In the process, the value of trade in both goods and services increased relative to the same period in 2021. These increases were partly caused by rising prices (including for energy) as well as the recovery of the economy following the COVID-19 crisis. 

At €89.8 billion, the capital account balance was exceptionally high in the second quarter of 2022, largely driven by the sale of intellectual property by a Dutch business unit of a foreign multinational to a foreign unit of the same multinational. This was an unusual transaction in terms of its size; never before has the capital account balance in the Netherlands or indeed in the entire euro area approached this amount.

What is the current account?

The current account is one of the three component parts of the balance of payments – the overview of all transactions between the Netherlands and other countries over a specified period. The other two components are the capital account and the financial account.

The current account includes international trade in goods and services, as well as primary and secondary income transactions. The difference between the current account income and expenditure is known as the current account balance. For the past few decades, the Netherlands has had a positive current account balance, also referred to as a surplus, which means that income has exceeded expenditure. In recent years, a relatively large export surplus, which is the difference between exports and imports of goods and services, has contributed to the surplus on the Dutch current account. Primary income transactions include wages, interest and dividends. Examples of secondary income transactions are pension and insurance payments, development aid and personal funds transfers. In terms of secondary incomes, more money has left the country than entered it in recent years, while the primary income balance has fluctuated.

The capital account records purchases and sales of non-produced assets such as trademark rights, in addition to capital transfers.

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