Broader definition of income leads to lower current account surplus

The Netherlands has had a current account surplus for decades. Simply put, this means the Netherlands has a net gain from its international economic relations, such as exports of goods and services and investment income (such as profits on foreign investments or dividends on investments). For more information, see also our Balance of Payments dashboard.

For policymakers, the current account balance is an important indicator of economic developments and vulnerabilities. For example, the European Commission's Macroeconomic Imbalance Procedure uses a threshold for the current account surplus of 6% of gross domestic product (GDP), measured over a three-year average. At 8.8%, the Netherlands' surplus in the period 2021-2023 is above this threshold.

Review of current account calculation method

One of the factors influencing the current account balance is income from international investments. There is international debate on how best to measure this income. Under the current calculation method, for equity investments, only paid dividend counts as investment income in the balance of payments. This may underestimate investors' income, as they also benefit from the earnings that companies retain and reinvest through the increase in value of their shares. 

To address this issue, the International Monetary Fund (IMF) has recently encouraged statisticians to publish additional information showing the impact for the situation in which all corporate earnings – distributed as well as undistributed – are attributed to investors. For the Netherlands, this impact is particularly relevant because our country has many foreign investors and also invests a lot abroad. By international standards, the Netherlands is an important location for listed multinationals, in which mostly foreign investors invest. At the same time, Dutch pension funds and insurers invest heavily in international financial markets.

Based on these data, DNB is publishing an analysis today calculating an experimental, alternative measure of the current account balance.

Alternative measure shows more income flows 

Based on this alternative measure, the Dutch current account surplus in the period 2021-2023 is 7.5% of GDP. This is still higher than the European Commission's 6% threshold, but also significantly lower than the 8.8% calculated under the official definition. In the years before 2021, the surplus under the alternative measure is on average slightly higher than under the official definition.

The alternative measure shows more clearly that the international investment income flows to and from the Netherlands are relatively high. The Netherlands is an important location for listed multinationals, in which mainly foreign investors invest. At the same time, Dutch pension funds and insurers invest heavily in international financial markets. According to the alternative current account measure, more income from Dutch companies is allocated to foreign investors, and Dutch investors receive more income from abroad. In most years, these effects on the current account balance largely cancel each other out. The period 2021-2023 shows a clear difference, however, which is mainly due to higher earnings and lower dividend payments by Dutch multinationals.

More information

• DNB Analysis: Retained Earnings and the Current Account
• Table 12.1: Balance of payments from 2008Q4 onwards
• Table 12.12: Net external assets from 2008Q4 onwards
• Dashboard: Balance of Payments
• Dashboard: External assets