Dutch current account surplus increases

Statistical news
Datum 26 maart 2018

In the fourth quarter of 2017, the surplus on the current account of the Dutch balance of payments was EUR 21 billion, or 11% of the Netherlands' gross domestic product (GDP). This brought the surplus for 2017 as a whole to EUR 75 billion, or more than 10% of GDP, almost 2 percentage points higher than in 2016. The trade surplus, which reflects the net value of goods and services imports and exports, went up. Dutch companies also recorded higher profits from their foreign subsidiaries. The Dutch net international investment position – the balance of Dutch claims abroad and foreign claims on the Netherlands – increased by EUR 35 billion to EUR 511 billion, or 70% of GDP, in 2017.

Current account

The trade surplus went up by more than EUR 7 billion, or 1% of GDP, relative to 2016. In nominal terms, goods and service exports were up by the same percentage as imports, 9% from a year ago, and both went up by 6% in terms of volume. Over a third of total goods exports are re-exports. They involve imported goods that are immediately re-exported following limited economic processing. Re-exports were up 12% from 2016, but exports of domestically manufactured products also increased, by 7%. Natural gas imports were higher, due mainly to Dutch production cutbacks. As a result, the trade balance for natural gas dropped by EUR 2.4 billion to EUR 0.5 billion in 2017.

Although remaining slightly negative at EUR -2 billion, the primary income balance was up EUR 8 billion, or 1% of GDP, in 2017. Dutch non-financial multinational corporations recorded EUR 12 billion more in profits from their foreign subsidiaries, while Dutch non-financial corporations owned by foreign parent companies saw their profits go up by a total of EUR 4 billion. These cross-border profits boosted net income from direct investment by EUR 7 billion. The net balance of interest income and expense on capital market paper also increased, by over 1 EUR billion, in 2017. On the one hand, interest income from foreign capital market paper was lower than in 2016, due in part to value losses. On the other, interest payments on Dutch capital market paper fell even more sharply as foreign holdings of Dutch government paper and bank bonds shrank.

Financial transactions and net international investment position

In 2017, Dutch non-financial corporations invested EUR 20 billion abroad on balance, which is a relatively modest amount compared with preceding years. There were no large foreign takeovers in 2017, and Shell's disposals across the globe weighed on the total balance of Dutch direct foreign investment. Foreign multinational corporations made larger investments in Dutch non-financial corporations, worth EUR 40 billion on balance. The greater part of this inward direct investment related to intra-group loans. In spite of media reports about possible takeovers involving such companies as Unilever and AkzoNobel, no major foreign takeovers took place in 2017. Special financial institutions, which are intermediaries located in the Netherlands that tend to immediately reinvest inward investments abroad, made relatively large foreign investments, worth well over EUR 240 billion. Mirroring this were incoming loans and participating interests of foreign parent companies of a comparable amount. On balance, direct investment led to an influx of EUR 17 billion into the Netherlands.

The portfolio investment balance in 2017 was relatively high in 2017, standing at EUR 58 billion, the principal contributing factor being the EUR 50 billion decline in foreign holdings of Dutch securities. Foreign holdings of Dutch government paper, which DNB purchases under the ECB's purchase programme, fell by EUR 33 billion in 2017. Furthermore, Dutch commercial banks redeemed large quantities of outstanding capital paper, a substantial portion of which was held by foreign investors. On balance, foreign investors purchased Dutch equities worth EUR 11 billion, predominantly of listed non-financial corporations. At EUR 9 billion, Dutch investors expanded their foreign securities holdings by a relatively small amount. Their net purchases of foreign debt paper came to EUR 15 billion in 2017, with Dutch pension funds accounting for the lion's share, purchasing large volumes of German and US capital market paper. Conversely, Dutch investors disposed of EUR 6 billion in foreign securities on balance, with the exception of investment funds, which purchased large amounts of equities, notably from the United States.

The Dutch net international investment position climbed EUR 35 billion to EUR 511 billion in 2017. Hence, the EUR 75 billion current account surplus was not fully reflected in higher Dutch net claims abroad. The appreciation of the euro depressed the value of Dutch claims abroad in 2017 and hence also weighed on the net international investment position. These foreign exchange losses were only partly compensated for by gains on foreign exchange derivatives hedging currency risks.