The surplus relates to the entire Dutch economy, including the special financial institutions (SFIs), which are included in DNB’s balance of payments figures since the first publication of the external balance in accordance with the new Balance of Payments and International Investment Position Manual (BPM6) in November 2014 (note 1). The Dutch net external assets – Dutch foreign holdings minus foreign holdings in the Netherlands, with capital interests measured at market value – stood at EUR 517 billion at the end of the third quarter (about 80 % of GDP over the last four quarters), an increase of EUR 196 billion compared with the year before.
At 9% of GDP, the surplus on the current account remained broadly unchanged compared with the third quarter of 2013. The slightly higher balances on goods and on services were offset by lower primary and secondary income balances. On a four-quarterly basis, the surplus therefore remained stable at a level just above 10% of GDP (see figure).
Chart 1: Current account balance (% of GDP, moving 4-quarters totals)
As regards the goods trade and the trade in services, the value of both exports and imports showed a positive development. Both imports and exports of goods were up compared with the same quarter of last year – with 1% and 2%, respectively. The substantially lower oil price resulted in lower import and export prices – of approximately -3% and -2%, respectively – and lower trade values for natural gas and other energy products. In addition, the lower euro also affected import and export prices. Looking at the trade in services, exports were up 8% and imports rose by 6% compared with the third quarter of 2013.
Primary and secondary incomes slightly dampened the current account surplus compared with 2013 Q3, however. Income from abroad from labour, direct investment, portfolio investment and other investment all declined. Profits from foreign equity capital – making up the greater part of total inward primary income with a share of around 60% – made the largest contribution with a EUR 2 billion fall. Outward income was also lower across the board. The lower interest rate on debt securities determines inward and outward income from securities, and is the main reason for lower outward primary income compared with the year before.
Financial transactions and net external assets
Net external assets of the Netherlands rose by EUR 16 billion in the third quarter, owing to financial cross-border transactions (contributing EUR 15 billion) and value changes. The increase can be attributed to securities transactions. On balance, Dutch investors invested almost EUR 10 billion in foreign securities. Short term foreign debt securities were most in demand (EUR 5 billion), followed by foreign investment funds (EUR 3 billion) and long term foreign debt securities (EUR 2 billion). The majority of purchases were made by pension funds (EUR 6 billion) and investment funds (EUR 7 billion), while monetary financial institutions (including De Nederlandsche Bank) sold EUR 10 billion worth of mainly foreign capital market paper.
Foreign investors, on balance, sold Dutch securities. They mainly sold Dutch long term debt securities (EUR 10 billion, including government paper worth more than EUR 7 billion), partly to Dutch investors and partly because of net redemption by the Dutch State. Dutch equity and shares in Dutch investment funds were bought on balance (EUR 5 billion), among others related to the initial public offering of Nationale Nederlanden. Striking in the third quarter were the emissions of debt securities by SFIs, whose proceeds were used to purchase foreign derivatives. The increase of net Dutch securities holdings was even more driven by value changes, which can be attributed to the price developments of bonds and the appreciation of the US dollar.
Note 1: See the Statistical News Release of 25 November 2014 and the accompanying background article for a description of the main changes implemented following the introduction of BPM6 and the impact on the balance of payments figures. Where relevant, the figures for special financial institutions are presented separately in the balance of payments tables.