The Netherlands' net international investment position down
In the second quarter of 2015, the Dutch net international investment position fell by EUR 75 billion to reach EUR 440 billion (with direct investment at book value). Financial cross-border transactions drove the decrease, caused indirectly by intellectual property moving to the Netherlands, as did sizeable value reductions. The Dutch surplus on the current account of the balance of payments was nearly EUR 17 billion, or 10% of GDP, in 2015 Q2.
Current account and capital movements
The surplus on the current account of the balance of payments in 2015Q2 was over a billion euro below that for the second quarter of 2014, which can be ascribed entirely to a lower balance of primary income received and paid. The trade balance was at a level similar to a year ago, both for goods and services. Imports and exports of goods show underlying increases, however (around 4% in volume terms), as do imports and exports of services (around 10%). The lower balance of primary income is due mainly to profit distributions, as Dutch businesses distributed higher dividends to foreign shareholders than a year ago, whereas Dutch investors received lower dividends on the equity and shares they hold.
At EUR -33 billion, the Dutch capital account balance was extraordinary high in the second quarter, reflecting the relocation of intellectual property rights (EUR 32 billion) to the Netherlands from abroad, which are recorded as purchases of non-manufactured non-financial assets. The relocation was accompanied by incoming capital contributions made to finance the rights, in the form of direct foreign investments in the Netherlands, These transactions will in future be mirrored in exports of R&D services and profit distributions abroad.
Financial transactions and net international investment position
The Dutch net international investment position fell by EUR 75 billion (with direct investment at book value), following several consecutive quarters of sizeable rises. Net positions in direct investments (EUR -35 billion change), securities (EUR -33 billion) and financial derivatives (EUR -41 billion) all dropped. The decrease can be largely (securities) to almost entirely (derivatives) explained by negative price movements driven by the turnaround in the interest rate environment and the decline in share prices, and to a lesser extent by exchange rate movements caused by the limited appreciation of the euro.
Chart 1: Dutch international investment position (EUR billion)
In direct investments, the special financial institutions (SFIs) were particularly prominent, mainly owing to the relocation of intellectual property rights referred to above. Conversely, at EUR 18 billion, outward direct investments by non-financial corporations outstripped their inward direct investments in the second quarter, which were EUR 5 billion. Outward investments in particular were loans between group companies. Equity investments showed little activity in the second quarter.
As regards securities transactions, financial cross-border transactions were accountable for EUR 19 billion of the decrease in net foreign securities holdings, following two consecutive years showing positive balances. Foreign investors bought EUR 6 billion in Dutch securities, while Dutch investors sold EUR 13 billion in foreign securities. The net foreign purchases concerned securities issued by Dutch SFIs (EUR 9 billion), while other Dutch securities were sold on balance. The foreign position in Dutch money market paper, which had already declined over the past few quarters, fell in 2015Q2 on the back of EUR 12 billion in further net sales. Of this amount, EUR 9 billion had been issued by banks, reflecting the Dutch banking sector's gradually reducing dependence on foreign short-term funding. Dutch sales of foreign securities reflected investment portfolio reallocations, with equities, investment fund units and money market paper being sold and capital market paper, notably German and American, being bought.
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