The Dutch balance of payments in the third quarter of 2012 – again a large current account surplus

Statistical News Release
Date 18 December 2012

In the third quarter of 2012, the Dutch current account showed a EUR 12.6 billion surplus.

Although this was slightly higher than in the previous quarter, it was more than one billion below the average of the previous eight quarter period and also markedly lower than the high outliers in the fourth quarter of 2011 and the first quarter of 2012 (see Chart). The decline was largely due to the emergence of a services deficit. The goods account experienced a slight drop in the surplus. These effects could not be entirely offset by the improvement of the income account. Over the past four quarters, the balance on current account came out at almost 10% of gross domestic product.

Current account balance

In the third quarter of 2012, the goods account showed a EUR 11.3 billion surplus. The value of both goods imports and exports fell slightly compared to the previous quarter. Volume growth of exports, compared to the same quarter last year, decelerated to 2.2%, significantly lower than in the previous quarter (6.3%). Volume growth of imports in the same period also dropped, but to a lesser extent: from 5.8% to 3.0%. The services account deficit in the third quarter is partly due to a seasonal effect, i.e. a high deficit in travel, which this time topped a record of EUR 3.1 billion due to the Dutch travel urge. In addition, growth of the export of other services declined. The income account balance surged (EUR 4.1 billion). Both on the revenue and the expenditure side, dividends and the interest on bonds and money market paper were lower compared to the previous quarter, but this effect was strongest on the expenditure side. This was due to reduced profitability of companies and a low level of interest rates. On the expenditure side, another contributing factor was that coupon yields on Dutch government bonds steadily declined as a result of redemptions of paper with high interest rates and emissions of paper with low interest rates – and for some time even a negative interest rate on short-term paper. As usual, the current transfers account was negative.

The current account surplus found its counterpart in a deficit in the financial account, which is entirely realised in direct and portfolio investment. Net direct investment compared to the previous quarter was considerably more negative and amounted to a shortage of EUR 14.4 billion compared to a shortage of EUR 6.9 billion. This shift strongly reflected a turnaround from carry-over losses to reinvested earnings by Dutch multinationals at their foreign subsidiaries. The high repayments by Dutch subsidiaries on loans to their foreign parent companies also contributed.

Portfolio investment showed a shift with respect to foreign securities, from selling to buying by Dutch residents. A number of developments, including the announcement of a purchasing programme of government paper under strict conditions by the ECB, calmed the securities markets and reduced the risk of foreign portfolio investments. On a modest scale, for instance, purchases of Irish debt paper were observed again. On balance, foreign investors still shed Dutch securities (EUR 3.4 billion). This was partly due to high redemptions of money market paper by Dutch banks (EUR 4.4 billion); new emissions – this time of longer-term debt paper – lagged far behind.