Netherlands' current account surplus revised upwards

The current account surplus has been revised upwards from previous projections by €43 billion for 2021 and €47 billion for 2022. This increases the three-year average of the surplus to gross domestic product (GDP) over 2020-2022 from 5.6% to 8.8%. The current account includes international trade in goods and services, and income transactions such as interest, dividends and pension payments.

There are three main causes for the revisions, wich are also reflected in the revised gross national income and gross domestic product figures, released by Statistics Netherlands (CBS), together with this longread. 

First, the balance of primary income with foreign countries has been revised upwards by €33 billion for 2021 and by €29 billion for 2022. This revision is mainly caused by higher than initially estimated profits by listed multinationals. Second, the export surplus is higher than previously released (+€10 billion in 2021 and +€15 billion in 2022). The magnitude of both revisions is exceptional from a historical perspective. For the export surplus, it can be explained in part by the uncertainty about the impact of the COVID-19 pandemic in 2021 in previous projections, as not all data from businesses was available at the time. Third, non-listed companies' profits distributed abroad are €6 billion lower than previously projected, leaving more income in the Netherlands on balance.

Multinationals' profits have large impact on current account

The current account surplus in the Netherlands is strongly influenced by the large role multinational companies play in our economy. This is partly due to differences in the way profits for investors, on the one hand, and profits for foreign investors with holdings in excess of 10%, on the other, are treated statistically.

Only the distributed part (dividend) of the profits a company makes is considered as income of the investor, while the undistributed part (also referred to as retained earnings) is attributed as income to the company. In the case of Dutch listed multinationals, the globally retained profits therefore accrue in the Netherlands, even if the shareholders of these companies are mostly foreign. The opposite effect occurs when, conversely, foreign-based companies do not distribute profits in full to Dutch investors, such as Dutch pension funds.

However, for direct investments in companies involving an interest of more than 10%, retained earnings are attributed as income to the direct investors. This is because statistical guidelines assume that such “large” investors in a company have a significant degree of control over how profits are spent (e.g. reinvested or distributed), while smaller shareholders do not.

Impact of registered office transfers by multinationals on current account

Partly because of the above dynamics, relocations of multinationals’ registered offices can have a major impact on the current account balance. Several foreign companies have moved to the Netherlands over recent years. This increases the Netherlands' current account surplus as these companies' undistributed profits are allocated to the Netherlands. Conversely, relocations of, for example, Shell and Unilever to the United Kingdom have had a dampening effect on the surplus for the same reason.

An indicative additional analysis for the year 2022 shows that the Dutch current account surplus would have been lower if retained corporate profits had been allocated to shareholders and not to the companies themselves.  In 2022, profits not distributed by Dutch companies and financial institutions to foreign investors amounted to almost 5% of GDP. Conversely, retained earnings not allocated to Dutch investors amounted to almost 3% of GDP. The net effect of this alternative treatment of retained earnings would therefore have resulted in a 2 percentage point reduction (around €19 billion) in the current account balance.

Further information

• Table 12.1: Balance of payments from 2015 onwards
• Table 12.12: Net external assets from 2015
• Dashboard: External assets