The Dutch Balance of Payments current account for 2010 shows a EUR 45 billion surplus. Following a steep drop in 2008 and stabilisation in 2009, the current account balance is now back to its pre-crisis level. The balance also increased again in proportion to the Dutch gross domestic product, from 5% in 2009 to 8% in 2010. This emerges from preliminary figures released today.
The exports surplus on the 2010 Dutch balance of payments rose by EUR 6 billion compared to 2009, to return to its 2008 level of EUR 43 billion. The underlying import and export value reached levels of over 20% above those of 2009, when the economic recession bottomed out. Both import and export values rose under the impetus of resurging world trade as well as rising oil prices. As the growth of total exports in 2010 exceeded that of total imports, the goods account balance increased substantially. The positive balance on the services account also rose in 2010, owing mainly to a stronger travel balance surplus. The Netherlands benefited from strongly increased popularity among foreign tourists.
The 2010 income account balance amounts to over EUR 5 billion, a reversal vis-à-vis the negative balances left by preceding years. This reversal was mainly driven by improved profits returned by foreign subsidiaries of Dutch enterprises. A preliminary estimate puts their contribution to the 2010 income account balance at EUR 28 billion, up by EUR 11 billion from 2009. A large share of total cross-border profits are earned by Dutch listed companies. Dividend payments by these multinationals to foreign investors, which reduce the balance on the income account, remained roughly constant in 2010 (at over EUR 11 billion).
Dutch outward foreign direct investments ran to EUR 24 billion in 2010, up 25% compared to 2009, when they amounted to over EUR 19 billion. Juxtaposed to the growth of outward direct investment were disinvestments worth EUR 12 billion by foreign investors in the Netherlands.
As in previous years, equity capital transactions, at EUR 28 billion, dominated outward direct investments. By contrast, outward other capital investments – consisting mainly of intragroup financing – declined by EUR 4 billion, roughly unchanged from 2009. The negative inward direct investments are almost entirely due to redemptions of intragroup loans (EUR 11 billion). Both developments – expansion of outward equity holdings and redemption of inward intragroup loans – lower (not counting other changes in balances) the leverage ratio, with positive effect on the solvency of Dutch enterprises and their cross-border group entities.
Portfolio investment and financial derivatives
Portfolio investment accounted for a large capital inflow in 2010. Dutch investors sold EUR 11 billion worth of foreign securities, on balance, compared to EUR 55 billion in net purchases the year before. A large share of the sales concerned money market paper (EUR 6 billion). The Dutch foreign bond position was also reduced, by EUR 4 billion. Dutch residents effected particularly large sales of US debt certificates (EUR 17 billion) and (mainly sovereign) debt issued in South European countries (Italy, Greece, Spain and Portugal, EUR 23 billion in all). Conversely, German and French-issued debt paper was in brisk demand, resulting in net purchases of, respectively, EUR 19 billion and EUR 12 billion.
Foreign investors bought EUR 34 billion worth of Dutch securities in 2010. In 2009, such purchases accounted for EUR 19 billion. Dutch equities (EUR 9 billion) as well as long-term (EUR 19 billion) and short-term (EUR 6 billion) debt certificates did well in 2010. Debt purchases were driven mainly by the large issuance of new certificates by Dutch banks. Dutch sovereign debt saw net redemptions and net sales by foreign residents for the second year running. 2008 had still seen large net purchases of new Dutch sovereign issues made to finance rescue operations in the banking sector.
In the financial derivatives market, there was EUR 15 billion in net outflows in 2010, mainly reflecting payments on forward exchange contracts. The depreciation of the euro, e.g. by 6% vis-à-vis the US dollar, caused the value of foreign investments to rise during 2010. This type of derivatives is used by especially Dutch institutional investors to hedge against exchange rate risks on their investments – due to appreciation of the euro – which in 2010 led to losses being made on such contracts.
As usual, changes in cross-border balances and bank loans made the largest single contribution to financial transactions flows in other investment. During the credit crisis, banks had considerably reduced their cross-border positions, partly because of reduced mutual confidence. However, 2010 saw a degree of stabilisation: a EUR 4 billion increase in lending and a EUR 6 billion decrease in borrowings (by contrast, 2008 and 2009 had seen lending decline by a total of EUR 167 billion and borrowings by a total of EUR 220 billion).
For further information, please telephone Tobias Oudejans (+31(0)20-5243100, +31(0)652496961), Herman Lutke Schipholt (+31(0)20-5242712, +31(0)652496900) or Kees Verhagen (+31(0)20-524 2272, +31(0)621123922).