Netherlands' current account surplus continues to decline

Statistical news
Datum 27 december 2019

In the third quarter of 2019, the surplus on the current account of the Dutch balance of payments fell by 8% year-on-year to EUR 19.3 billion, corresponding to 9.7% of Dutch gross domestic product (GDP).

By contrast, in 2018 there was a record surplus on the current account of EUR 84 billion year-on-year (11% of GDP). Given that the previous quarters also showed year-on-year declines, it is unlikely that this level will again be achieved in 2019. However it still exceeds the 6% standard set by the European Commission in the context of the macroeconomic imbalance procedure (Macroeconomic Imbalance Procedure MIP).

As in the previous two quarters, the decline in the third quarter was mainly driven by a downward movement of the primary income balance.

Primary income balance depresses current account

Primary income dropped by 90% year-on-year to EUR 158 million in the third quarter (see Figure 1). Lower profits from foreign subsidiaries of Dutch-based companies weighed down on the revenue side. Some of these lower profits were attributable to listed companies with only a limited physical presence in the Netherlands. At the same time, expenditure increased due to higher profits from Dutch subsidiaries of foreign companies.

The balance of goods exports and imports fell by 4% year-on-year to EUR 17.6 billion. Export growth lagged behind import growth, owing in part to developments abroad, such as the muted performance of the German industry sector. Import growth was supported by increased imports of passenger cars compared to the same period in 2018.

At the same time, the services balance went up by 43 percent to EUR 2.9 billion, resulting in a year-on-year improvement of the trade balance. This was mainly due to a large company gradually reducing its activities in the Netherlands and importing fewer licences as a result.

The secondary income balance was negative, as usual, and stood at EUR -945 million. This figure includes EU budgetary contributions from and subsidies to the Dutch government, as well as money transfers from migrants to their countries of origin.

Sharp increase in international investment position

The net international investment position – the balance of Dutch claims abroad and foreign claims on the Netherlands – increased sharply in the last few quarters (see Figure 2). It stood at EUR 732 billion in the third quarter, a rise of 50% compared to the end of the third quarter of 2018.

In the fourth quarter of 2018 the net international investment position for the first time broke the EUR 500 billion limit. Over the years, the net international investment position has also been rising as a percentage of GDP, but now this trend is accelerating.

It is mainly driven by the upward value changes of assets held by Dutch banks, investment funds and pension funds abroad, caused by broad-based price rises of shares, bonds and derivatives in the international financial markets.