In the third quarter of 2020, the surplus on the current account of the Dutch balance of payments fell by 20% (EUR 4.3 billion) year-on-year to EUR 17 billion. For the third consecutive quarter, the COVID-19 crisis weighed down more heavily on income from abroad than on expenditure, as Dutch firms posted sharply lower foreign profits in the third quarter. The Dutch trade balance, by contrast, showed improvement.
Trade balance improves as underlying trade volumes shrink
The Dutch trade balance went up 8% year-on-year, reflecting a stronger decline in imports of goods and services than in exports. The underlying volumes continue to point to contraction in trade (see Figure 1), however.
While total exports receded by 7% to EUR 156.7 billion, imports slumped by 9% to EUR 135.2 billion. These figures represent an uptick from the trend seen in the second quarter of 2020, when both imports and exports slid by roughly 15% year-on-year.
In contrast to previous quarters, trade in services was more severely affected than trade in goods. Services exports fell by 12% to EUR 40.6 billion, while services imports dropped 15% to EUR 37.3 billion. Once again, the travel and tourism sector was among the hardest hit, in terms of both imports and exports.
Goods exports fell by 5% to EUR 116 billion, while services imports dropped 6% to EUR 97.9 billion.
Firms face a sharp decline in foreign profits
The primary income balance declined EUR 5.2 billion relative to the third quarter of 2019, to reach EUR -2.4 billion. The decrease was mainly driven by lower profits received by Dutch firms from foreign direct investment. Lower dividend payments distributed by Dutch listed companies offset this effect to some extent.
Since the second quarter of 2020, Dutch firms have made smaller profits on their foreign participating interest than foreign firms made on their Dutch participating interests (see Figure 2). A negative balance on cross-border profits was last recorded in 2014.
Whereas the former fell 23% year-on-year to EUR 41.3 billion, the latter declined by 11% year-on-year to EUR 41.6 billion. Dividend distributed on equity dropped 43% to EUR 4.1 billion.