In 2024, the German current account surplus increased slightly by ¼ percentage point to 5¾% of nominal gross domestic product (GDP). It thus remained below the peaks of previous years. Exports decreased, even though sales markets expanded. At the same time, demand for imports remained weak, as investment was on a moderate path. All in all, though, the sub-balances of the current account in 2024 were little changed against the previous year. The balance of trade in goods was virtually unchanged, and the deficit in the services account widened slightly but was more than offset by higher balances for primary and secondary income. In line with the current account balance, the balance of savings and investment (aggregate net lending/net borrowing) was also virtually unchanged. Enterprises saved less as higher staff costs reduced their profits. At the same time, investment was dampened by weak demand as well as structural and cyclical factors. High financing and construction costs were also a drag on housing investment. Households increased their savings, as their consumption remained subdued despite rising real incomes. The general government deficit widened slightly, mainly as a result of one-off tax refunds.

In keeping with the slightly increased current account surplus, the financial account also closed with a somewhat higher balance in 2024 than in the previous year. There were two factors driving developments in its sub-accounts: first, the ongoing cyclical weakness in Germany, also when compared to other countries. This was reflected in further declining direct investment flows and rising net capital exports of mutual fund shares and stocks. The second factor was the final stop to Eurosystem asset purchases, coupled with slightly looser (albeit still restrictive) monetary policy. One of the outcomes of this combination was a smaller scarcity premium for German Federal bonds. Accordingly, foreign investors significantly increased their holdings of these securities, which are deemed to be particularly safe. The strong demand for German debt securities from other European countries also meant that the German TARGET balance did not fall as sharply as would actually have been expected given the maturing asset purchases of the Eurosystem.

1 Current account

1.1 Underlying trends in the current account

The German current account surplus increased slightly in 2024. It rose by €14 billion to €246½ billion. The balance increased by ¼ percentage point to 5¾% of nominal GDP. The surplus thus remained high, but is still well below its peaks prior to the outbreak of war in Ukraine and the coronavirus pandemic.

Germany's current account

The sub-balances of the current account changed only marginally in 2024. The goods trade balance remained broadly stable, since exports contracted despite growing sales markets and imports declined as a result of subdued investment. The deficit in the services account widened marginally, but was more than offset by slight increases in the balances of primary and secondary income. All in all, the sub-balances of the current account in 2024 were little changed against the previous year.

The global setting remained subdued in 2024. Growth in the global economy was stable but below average. Central banks’ tight monetary policy led to a drop in inflation rates in many countries. However, demand continued to suffer given higher financing costs, and fiscal support measures were phased out. According to CPB Netherlands Bureau for Economic Policy Analysis, the volume of global trade grew moderately by 1¾%, having declined in the previous year. The euro appreciated marginally in 2024, which put a slight damper on Germany’s price competitiveness. Global market prices for commodities, particularly natural gas and other energy imports, continued to decline slightly, but on average remained above the long-term average.

Price and volume effects on the German foreign trade balance

The value of the foreign trade surplus rose slightly in 2024, mainly due to price effects. Import prices for commodities, especially energy, fell slightly, whilst export prices remained broadly stable. This led to a marginal year-on-year improvement in Germany’s terms of trade. In terms of volume, by contrast, the balance barely changed. Real imports and real exports both decreased by more or less the same amount.

In regional terms, the current account surplus vis-à-vis non-euro area countries increased. It went up by ¼ percentage point to 3¼% of GDP. This was mainly because of larger surpluses in primary income. By contrast, the current account surplus vis-à-vis euro area countries remained virtually unchanged, at 2½% of GDP. Germany recorded the largest current account surpluses vis-à-vis the United States, France and the United Kingdom (see the supplementary information on Germany’s current account surplus vis-à-vis the United States.

Savings and investment in the German economy

In the year under review, aggregate net lending/net borrowing (the balance of saving and investment) remained broadly unchanged relative to GDP.[1] Looking beyond that, however, there were opposing developments in the individual sector accounts. Non-financial corporations’ savings declined significantly, particularly owing to higher staff costs. At the same time, net investment relative to GDP decreased, but not as much as savings. On the one hand, the ongoing weakness of the export industry and subdued domestic demand were a hindrance. On the other hand, structural factors depressed investment. In addition, housing investment continued to decline, pushed down by high financing and construction costs. Households significantly increased their savings as private consumption remained subdued in spite of rising real incomes. Political and economic uncertainties as well as the gloomier labour market situation dampened the propensity to consume. The general government funding deficit widened marginally. Even though the energy price brakes were no longer in place, the deficit ratio remained virtually unchanged due to the countervailing effect of higher spending on defence, climate action, personnel, interest and social security schemes.

The German current account surplus vis-à-vis the United States

Bilateral trade imbalances once again became the focus of economic policy discussions under the new US administration. It is considering massive tariff increases with the intention of, amongst other things, reducing the US current account deficit.[1] On an average of the first three quarters of 2024, this stood at 3¾% of GDP, compared with 2% in 2019. The bulk of the current account deficit is attributable to trade in goods and services. At the bilateral level, the United States recorded its largest deficit in trade in goods and services in 2024 vis-à-vis China, followed by Mexico, Vietnam and Germany. The US trade deficit with Germany has remained broadly stable over the past few years, at ¼% of US economic output.[2] Arithmetically, around one-tenth of the United States’ total trade deficit was attributable to Germany.

The United States was Germany’s main trading partner in 2024. The United States ranks first among the customer countries for German goods and third in terms of suppliers.

Germany’s current account surplus vis-à-vis the United States was significantly higher in 2024 than during President Trump’s first term of office. This was mainly due to the higher goods account surplus. Germany’s foreign trade balance vis-à-vis the United States stood at around €70 billion (1¾% of German GDP) in 2024, having amounted to €47½ billion (1¼% of GDP) in 2019. This made it Germany’s largest bilateral surplus.[3]

German current account balance vis-à-vis the United States

From both the sectoral and net perspectives, Germany recorded a particularly high export surplus vis-à-vis the United States for motor vehicles and parts and machinery as well as for pharmaceutical products and electrical equipment in 2024. These rank among the products that make up a large share of total German exports to the United States, and are significant for individual industrial sectors. These sectors would thus be especially hard-hit by new tariffs.

Product mix of the German foreign trade balance vis-à-vis the United States

Imports of energy products from the United States dampened the bilateral foreign trade surplus. This has particularly been the case with oil, gas and coal imports since the start of the war on Ukraine. Import contributions from other transport equipment (especially in the aerospace industry) up to 2023 also had an impact here. Furthermore, the United States is of above-average importance as a supplier of pharmaceutical products. Imports from the United States account for around one-sixth of all German pharmaceutical imports, although Germany also has an overall surplus vis-à-vis the United States in this category of goods.

In 2024, Germany’s services surplus vis-à-vis the United States barely contributed to the corresponding current account surplus. Between 2016 and 2020, the surplus in bilateral trade in services stood at around €3 billion to €4 billion. It increased almost fivefold in 2021 in the wake of the coronavirus pandemic. This was due to a rapid rise in receipts, particularly from intellectual property, with receipts from the development of vaccines playing a key role. The surplus remained relatively high in 2022, too. In 2023, however, it more than halved, mainly due to a considerable drop in receipts (also attributable to receipts from vaccine development no longer being received) which continued into 2024. At around €3½ billion in 2024, the volume of the services surplus was roughly the same as it was during President Trump’s first term of office.

Trade in services with US companies is often conducted via their European subsidiaries, which makes it difficult to allocate it directly to the United States. In the IT sector, in particular, trade is often settled via countries such as Ireland, where many US firms have their European head offices. This is supported by the fact that the EU’s bilateral balance in services trade vis-à-vis the United States is deep in negative territory, while the bilateral balances of the largest Member States vis-à-vis the United States (e.g. Germany, France and Italy) are all positive.

In 2024, the primary income balance made a considerable contribution to Germany’s surplus vis-à-vis the United States. This had risen sharply since 2022, mainly owing to higher receipts from other investment income (including interest from bank balances). However, the funds that flowed from this primary income item to the United States also increased. This suggests that making financial investments in the United States was considered an attractive option. In 2024, net receipts in primary income totalled around €24½ billion.[4] This figure was considerably higher than before, but still made up approximately one-quarter of the current account surplus.[5]

Trade balances alone do not indicate whether a country is benefiting from or being disadvantaged by trade. Focusing on comparative advantages allows countries to benefit from trade together. These benefits cannot be inferred from bilateral balances. Although tariffs can influence bilateral balances, they usually have no lasting impact on the overall trade balance due to trade diversion effects.[6] This is also evidenced by the development of the US trade balance since 2018. Although the bilateral deficit in trade with China has fallen significantly since then in the wake of trade disputes, the US trade deficit has continued to rise overall. Trade deficits are always influenced by a number of macroeconomic factors such as households’ propensity to consume, the role of a currency as a reserve currency, and demand for a country’s assets.[7]

See The White House (2025a, 2025b). Tariffs were imposed on aluminium and steel imports to the United States on 12 March 2025. In response, the EU launched countermeasures of equal magnitude, which are intended to apply as from April 2025.
Between 2019 and 2024, the bilateral current account deficit of the United States vis-à-vis Germany rose marginally, from slightly over ½% to just under ¼% of US economic output at last count.
In 2024, Germany’s surplus in trade in goods vis-à-vis the United States, which comprises merchanting and trade in non-monetary gold in addition to supplementary trade items, was even larger than the foreign trade surplus, at around €76½ billion.
The allocation of transactions to the United States could also be more difficult for the bilateral primary income balance.
As was generally the case, the deficit in secondary income was negligible in 2024.
See Cuñat and Zymek (2024).
See Obstfeld and Rogoff (1995), Gourinchas and Rey (2007) and Lane and Milesi-Ferretti (2001).

1.2 Goods flows and trade balance

Price-adjusted foreign trade weakened again on an annual average. Goods exports and imports both declined (by 1½% and 1¾% respectively) in line with the persistent weakness of the economy. Nominal exports fell almost as sharply as price-adjusted exports. Imports saw a noticeably steeper decline in terms of value than in real terms because the prices of intermediate goods and, in particular, of energy products fell. On balance, the foreign trade surplus increased by €21½ billion to €239 billion.

In regional terms, the German export industry recorded marked revenue losses in exports to the euro area, while deliveries to third countries declined only slightly overall. Meanwhile, exports to Germany’s most significant trading partners within the euro area fell significantly. In contrast to this, exports to other important sales markets in Europe and to the United States saw a marked expansion. Deliveries to Japan were also up strongly. Exports to Ukraine increased considerably, which was attributable to goods delivered in connection with the war.[2] Exports to Russia, which remained subject to EU sanctions, continued to dwindle from an already very low level. Substantial revenue cuts were recorded in exports to other sales markets in South and East Asia. Sales to China fell particularly sharply, with motor vehicles and motor vehicle parts playing a considerable role (see the supplementary information on China).

**Table 6.1: Foreign trade by region**
%
	Percentage	Annual percentage change
Country/group of countries	2024	2022	2023	2024
Exports
Euro area	37.9	19.2	-2.2	-2.4
Other countries	62.1	14.5	-0.5	-0.5
of which:
United Kingdom	5.2	13.5	6.3	2.4
Central and eastern European EU countries¹	13.3	16.9	-1.8	1.1
Switzerland	4.4	16.4	-5.4	1.8
Russia	0.5	-45.4	-38.8	-14.9
United States	10.4	28.1	1.1	2.2
Japan	1.4	12.4	-1.3	6.5
Newly industrialised economies in Asia²	2.7	14.2	-5.6	-4.4
China	5.8	3.1	-8.8	-7.6
South and east Asian emerging market economies³	2.4	14.3	5.7	0.4
OPEC	1.7	10.1	11.1	8.7
All countries	100.0	16.3	-1.2	-1.2
Imports
Euro area	34.5	17.5	-6.4	-4.2
Other countries	65.5	30.8	-11.6	-2.3
of which:
United Kingdom	2.8	25.4	-9.1	-1.1
Central and eastern European EU countries¹	15.2	16.6	3.9	-2
Switzerland	4.0	13.2	-7.1	1.8
Russia	0.1	9.8	-90.1	-49.8
United States	6.9	29.1	1.4	-3.4
Japan	1.7	8.3	0.6	-11.2
Newly industrialised economies in Asia²	2.5	27.6	-4.5	-10.1
China	11.9	34.9	-18.7	-0.3
South and east Asian emerging market economies³	4.4	33	-7.3	0.5
OPEC	1.0	89.6	19.2	-28.1
All countries	100.0	26	-9.9	-3
1 Bulgaria, Czechia, Hungary, Poland, Romania. 2 Hong Kong, Singapore, South Korea, Taiwan. 3 India, Indonesia, Malaysia, Philippines, Thailand, Vietnam.

Recent developments in German exports to China

Germany’s exports to China by value declined considerably more rapidly than its exports as a whole in 2023 and 2024. While German exports to China moved roughly in step with total German exports between 2011 and 2015, between 2015 and 2019, exports to China grew at a much faster pace across a wide range of sectors.[1] They have not had similarly high growth rates since then. Since 2023 – with the special factors caused by the COVID-19 pandemic and Russia's war of aggression against Ukraine no longer affecting German exports to China – German deliveries to China by value have fallen very sharply and considerably more rapidly than total German exports.[2] China’s share of total German exports declined from 7¼% in 2019 to 5¾% in 2024. As a result, China slid to fifth place in the ranking of export destinations, from third place in 2019.

Germany's exports to China

The sharp declines in exports to China in 2023 and 2024 were driven above all by a fall in exports of motor vehicles and motor vehicle parts. Exports of this product category by value, which have a particularly high weighting in German exports to China, decreased quite considerably in both years, by 18% and 17¼% respectively. The rapid transformation of the Chinese automotive market towards electromobility played an important role in this context. This segment is dominated by Chinese providers, while German manufacturers have so far achieved only very small shares of the market. As a result, German manufacturers faced significant declines in sales figures in China. This adversely impacted not only production in China itself, but also German motor vehicle exports to China.[3]

Germany’s exports of other industrial goods to China have also dropped significantly in recent years – broadly in line with those of other exporting countries. The reason was China’s relatively subdued economic activity. Another important factor was likely that China has made strong gains in competitiveness in many areas and can now itself manufacture many of the products that it had previously bought from other countries.[4] Against this backdrop, growth in Chinese import demand for industrial goods has been rather sluggish in recent years, although Germany does not seem to have been affected much worse than other exporting countries.[5]

The sharp falls in exports to China in 2023 and 2024 are being felt in the German export industry. This applies in particular when compared with the high growth rates in exports to China during the years before the pandemic. The lack of exports to China is weighing particularly on the German automotive industry, which is having to deal with considerable problems as it is. In 2022, about 12% of all German exports of motor vehicles and motor vehicle parts still went to China. In 2024, this had dropped to 7¾%. Developments in total German motor vehicle exports during the past two years (+10¼% in 2023 and -2½% in 2024 respectively) were therefore significantly depressed – by 2¼ percentage points and 1½ percentage points respectively – by the drop in deliveries to China.[6] The dampening effect of Chinese demand on other industrial products was mostly small. Across the range of products as a whole, the sharp fall in deliveries to China shaved about ½ percentage point a year off total German export growth.

While in nominal terms, German exports to China were 10% higher in 2015 than in 2011, they expanded by 34¾% between 2015 and 2019. Particularly strong contributions to growth came from motor vehicles and motor vehicle parts, data processing equipment and electronic products, machinery, electrical equipment, and pharmaceutical products.
Exports to China increased very sharply in 2021, in step with the rapidly expanding Chinese economy; however, in the catch-up process following the pandemic-related collapse in 2020, German exports as a whole grew even more strongly. The pace of exports to China slowed in 2022 due to the relatively moderate growth of the Chinese economy, which had also been impacted by the rigid measures taken there to contain the COVID-19 pandemic.
See Deutsche Bundesbank (2024a).
In this context, competitive pressure from Chinese companies on global markets increased significantly for German exporters. See Deutsche Bundesbank (2024b).
Germany’s share of total Chinese imports of manufactured goods went down from 6.8% in 2022 to 6.1% in 2024. Excluding automotive vehicles, there was only a slight decline from 5.4% to 5.1%.
German automotive companies will probably have been even worse affected by the downturn in sales of their vehicles produced in China than by declining exports to China. They had made considerable investments in production facilities in China in the past. Although these investments were very profitable for a long time, the profits generated by them have fallen significantly in recent years. See Deutsche Bundesbank (2024a).

In terms of the product mix, price-adjusted exports of capital goods and numerous intermediate goods decreased, whereas deliveries of consumer goods increased. Exports of motor vehicles and motor vehicle parts saw a steep drop. This was due to declining revenue in key sales markets. Deliveries to the United States rose noticeably in value terms. Exports of motor vehicles and motor vehicle parts to China fell again considerably, however, as Chinese demand shifted strongly to electric vehicles, especially to domestic brands (see the supplementary information on recent developments in German exports to China). There was also a strong decline in sales of motor vehicles to the euro area and the United Kingdom. Exports of classic capital goods such as machinery likewise fell sharply in price-adjusted terms. In addition, exports of machinery and equipment and intermediate goods from the electronics and electrical equipment sectors saw a marked contraction. The same was true of iron and steel products, which have a particularly energy-intensive manufacturing process. Exports of chemical products, which are likewise energy-intensive, rose sharply. However, this did not make up for even one-third of the considerable decline in the previous year. Production of these had been severely affected by the sharp rise in energy prices since the start of the war in Ukraine. In the case of consumer goods, deliveries of pharmaceutical products were noticeably higher in the reporting year. For energy products, the volume of electricity and natural gas exports was down, quite considerably in the latter case,[3] whereas significantly more refined petroleum products were exported.[4]

Foreign trade by selected categories of goods in 2024

The German export industry once again lost market share in its sales markets last year. In 2024, German sales markets grew more strongly than exports. These kinds of losses in market share have been occurring for several years now, but have been particularly pronounced since the pandemic. Moreover, surveys of German exporters show that they have already been tending to rate their competitiveness more and more poorly for some time, even prior to the coronavirus crisis. Competitiveness has accordingly fallen dramatically in recent years.

Exports, sales markets and perceived competitiveness of the German export industry

The losses of competitiveness illustrate the structural challenges facing the German economy, some of which have already been making themselves felt for some time.[5] Some of these structural problems became more apparent once the acute crises of 2020 and 2022 had subsided. They were also compounded by unfavourable developments which had a particular impact on the German economy. These include the higher energy prices since Russia’s war of aggression against Ukraine,[6] the challenges of the green transition, which recently posed problems for the German automotive industry especially,[7] and firms’ increasing complaints about bureaucratic burdens.[8] Furthermore, mounting competitive pressure from Chinese firms and the weak growth of the Chinese economy are adversely affecting German exports.[9]

Nominal imports from the euro area fell noticeably more sharply than imports from third countries. Both regions suffered from the lower demand from Germany for key capital goods such as motor vehicles and machinery; furthermore, euro area countries did not benefit from the increased demand for pharmaceutical products. Imports from China stayed at almost the prior-year level and thus outperformed the cross-country average.[10] In net terms, German importers benefited from declining prices for energy and intermediate goods. Imports from OPEC countries were down quite considerably in terms of value, mainly because lower volumes of crude oil and refined petroleum products were imported. The value of imports from Norway also fell very strongly. One particular contributor to this was the drop in prices of natural gas, which accounted for almost three-fifths of total German imports from Norway. By contrast, a significantly larger volume of crude oil was sourced from Norway. Deliveries from Russia once again declined quite considerably in percentage terms.[11] They had fallen to very low levels in the previous year owing to EU sanctions in connection with the war in Ukraine.

The product mix of imports developed in a similar way to that of exports. Weak German industrial activity weighed on imports of capital goods and intermediate goods, whereas imports of consumer goods expanded substantially. However, there was a significant increase in purchases of chemical products and, above all, computer equipment manufactured abroad. For energy products, the imported volume of coal,[12] refined petroleum products and natural gas dropped steeply. However, this contrasted with a strong increase in the volume of crude oil deliveries. In addition, the volume of imported electricity rose considerably, which was mainly related to the decline in domestic electricity production.[13]

1.3 Invisible current transactions

In 2024, the deficit in the cross-border services account increased considerably on the year to €74 billion. The international exchange of services with Germany has become enormously important over the past few years. In 2024, services to the tune of almost €1 trillion were purchased from abroad or sold to other countries by Germany. Compared with the goods trade revenue of around €2½ trillion, this is not an insignificant economic activity. In contrast to international goods trade, however, Germany routinely imports more services than it exports.[14] Expenditure rose at a faster pace than revenue last year. The deficit thus increased by a little more than €10 billion on the year, resulting in the highest deficit in the Federal Republic of Germany’s existence.

Cross-border travel is the main reason for the very negative services account balance. At €111 billion, residents’ foreign travel expenditure was three times as high as income from foreign travellers in Germany (€37 billion). In 2024, the deficit of the travel account alone, a sub-account of services, was equal to the deficit in the services account as a whole. While revenue in this category, which Germany generates predominantly from travel for city trips, trade fairs, events and business trips, so far has not even reached the level of 2019 (prior to the COVID-19 pandemic), expenditure here has substantially exceeded that level since 2022. Private foreign travel by persons living in Germany was the dominant factor here. In this area, there has been no sign of consumer restraint thus far. In regional terms, the beneficiaries of this were most other EU countries, in particular, as well as Turkey. Expenditure on long-distance travel, meanwhile, just reached its pre-pandemic level.

The lion’s share of the services account’s total assets stems from the international exchange of commercial services.[15] Although services may appear less tradeable internationally than physical goods, sales of the former have quadrupled over the past 20 years.[16] In addition to increasing international interconnectedness, ongoing digitalisation has significantly expanded trading opportunities. However, commercial services are also subject to cyclical fluctuations; here, too, the subdued economic situation in Germany was reflected. Revenue from services exports rose by just over 3% on the year in 2024, which was significantly weaker than the average of the past two decades. At just over 6%, expenditure rose more sharply, although it, too, fell short of the long-term average. In the reporting year, the previously small deficit for all commerce-heavy services taken together rose by €11 billion to just under €21 billion. This was partly due to other business services, including research and development, professional and management consultancy services, commissions, and technical and other services. In addition, the reduction of a one-off effect from the pandemic again led to a smaller surplus in the item “charges for the use of intellectual property”. The effect is related to the development of vaccines, generating exceptionally high revenue in 2021 and 2022, in particular.[17]

Together with trade in goods, it was the primary income balance that contributed to Germany’s high current account surplus. The surplus for 2024 came to €149 billion, representing an increase of approximately €12 billion compared with 2023. As a result, net primary income alone accounted for around 3½% of GDP.

The high primary income surplus is mainly the result of net investment income. Payments by residents to foreign investors grew at a similar rate on the year as income from domestic investors abroad. This was mainly on account of interest rates being hiked once more – albeit to a far lesser extent than in the previous two years. However, as German residents have far greater exposures abroad than foreign investors do in Germany, the amount domestic investors and lenders redeemed from cross-border investment income was far higher than their expenditure.

Key indicators of the cross-border investment income balance

As in the previous year, the deficit in the cross-border secondary income account fell in 2024.[18] Expenditure exceeded revenue by €64 billion in the reporting year. There were increases in sales, primarily in connection with non-government cross-border secondary income. The volume of remittances of foreign nationals living in Germany rose, although they play a relatively minor role in terms of cross-border payment flows. By contrast, government cross-border expenditure and corresponding revenue both declined, with government expenditure falling on balance. Here, too, the reason lies in Germany’s persistently subdued economic output, which, to a significant extent, acts as a measure of the expenditure on Germany’s contributions to the EU budget, which were correspondingly lower in 2024.

**Table 6.2: Major items of the balance of payments**
€ billion
Item	2022^r	2023^r	2024^r
I. Current account	+ 152.0	+ 232.8	+ 246.7
1. Goods	+ 133.2	+ 227.1	+ 235.5
Receipts	1,401.9	1,392.3	1,365.1
Expenditure	1,268.7	1,165.2	1,129.6
Memo item:
Foreign trade¹	+ 88.1	+ 217.7	+ 239.1
Exports	1,594.3	1,575.2	1,556.0
Imports	1,506.3	1,357.5	1,316.9
2. Services	- 32.0	- 63.4	- 74.0
of which:
Travel	- 54.9	- 71.8	- 74.1
3. Primary income	+ 119.3	+ 136.8	+ 149.0
of which:
Investment income	+ 119.2	+ 135.0	+ 143.5
4. Secondary income	- 68.4	- 67.7	- 63.8
II. Capital account	- 20.7	- 26.8	- 20.4
III. Financial account²	+ 150.7	+ 195.4	+ 239.4
1. Direct investment	+ 60.9	+ 24.2	+ 30.3
2. Portfolio investment	+ 13.8	+ 2.2	+ 31.4
3. Financial derivatives³	+ 44.6	+ 35.8	+ 42.0
4. Other investment⁴	+ 26.9	+ 132.5	+ 137.1
5. Reserve assets	+ 4.4	+ 0.9	- 1.4
IV. Errors and omissions⁵	+ 19.4	- 10.6	+ 13.1
1 Special trade according to the official foreign trade statistics (source: Federal Statistical Office). 2 Increase in net external position: + / decrease in net external position: -. 3 Balance of transactions arising from options and financial futures contracts as well as employee stock options. 4 Includes, in particular, loans and trade credits as well as currency and deposits. 5 Statistical errors and omissions resulting from the difference between the balance on the financial account and the balances on the current account and the capital account.

2 Capital account

The German capital account captures cross-border transactions of non-produced non-financial assets and capital transfers and closed 2024 with a deficit of €20½ billion. In the previous year, the deficit had amounted to €27 billion. In terms of transaction volume, the capital account is generally significantly smaller than the current account or financial account, but has gained in significance in recent years. This is because the price of emission allowances under the European Union Emissions Trading System (EU ETS) rose significantly at the end of 2021, after important reforms had entered into force.[19] Since 2022, trade in emissions allowances has been by far the most important item in the category of non-produced non-financial assets and is also shaping developments throughout the capital account as a whole.

From a German perspective, cross-border transactions of non-produced non-financial assets closed 2024 with a deficit of €16 billion, which was thus somewhat lower than in 2023 (€19½ billion). The shortfall was almost exclusively attributable to the surplus in expenditure on emissions allowances trading (€15½ billion). Cross-border trade in intellectual property also dominated sales in 2024, which was reflected in a deficit of €½ billion.

In terms of capital transfers, Germany likewise recorded higher expenditure than revenue on balance in 2024 (€4½ billion). A year earlier, this deficit had amounted to €7½ billion. Alongside a large number of other types of transfer, insurance benefits for major losses contributed €1 billion to the deficit in this category.

Does the use of Bitcoin as legal tender affect cross-border capital flows? Empirical evidence using El Salvador as an example[1]

On 7 September 2021, El Salvador became the first country in the world to officially recognise Bitcoin as legal tender, as part of a bid to improve its population’s access to financial services.[2] However, the economic and financial consequences of this unconventional policy decision were controversial from the outset. The International Monetary Fund (IMF), for example, warned El Salvador’s policymakers that making a crypto-asset legal tender would pose significant risks to financial and market integrity, financial stability and consumer protection.[3] In late January 2025, the parliament of El Salvador lifted the mandate requiring merchants to accept Bitcoin as a means of payment, reversing the privileged status of Bitcoin as legal tender that had been introduced three years earlier.[4] This was one of the IMF‘s conditions for a US$1.4 billion support package.

This supplementary information examines whether the introduction of Bitcoin as legal tender in El Salvador in September 2021 affected the country’s cross-border capital flows. The first part of the analysis draws on aggregate IMF balance of payments data. The database distinguishes between four types of asset categories in the area of capital flows, which is the subject of this analysis: foreign direct investment, debt securities, equities and other investment. For the empirical analysis, all capital flows are measured in relation to the gross domestic product (GDP) of the country in question.

The analysis is limited to Central America and compares the development of El Salvador’s capital flows with other countries in the region. Specifically, the countries examined are Costa Rica, Guatemala, Honduras and Nicaragua. Not only do these countries share a variety of common features, such as language, size and level of economic and financial development, but they have also constituted the Central American Common Market (Mercado Común Centroamericano, MCCA) for more than half a century.

The analysis uses a difference-in-differences estimator to assess the impact of Bitcoin as a means of payment on capital flows. In formal terms, the regression equation is as follows:

$$Capital flows_it=α_i+β_t+γ× (El Salvador_i×Bitcoin_t)+δ×Z_{it} +ε_{it}$$

where capital flows_{it} denotes the capital flow of country i at time t; \alpha_i represents country-specific fixed effects that account for time-invariant country factors; \beta_t represents time-specific fixed effects that capture global developments, and Z_{it} represents a vector of other country-specific and time-specific control variables. The main focus is on the interaction term between the binary variables El\,Salvador_i and Bitcoin_t. This interaction indicates how capital flows from El Salvador evolved after the introduction of Bitcoin as legal tender compared with the period prior to its adoption.

Panel regressions, which additionally control for country-specific uncertainty, clearly show that Bitcoin had a negative effect on El Salvador’s cross-border capital flows. Chart 6.10 shows the regression results separately for El Salvador’s capital exports and capital imports following the policy measure compared with the other four countries in the control group. The overview distinguishes between a short-term (-/+ four quarters relative to Q3/2021) and a long-term (-/+ eight quarters relative to Q3/2021) period. The equation is estimated using the ordinary least squares (OLS) method. The dependent variables are expressed as a percentage of GDP. All estimated parameters are negative. Only in the short term do capital imports not respond significantly to the introduction of Bitcoin as legal tender. All other coefficients are statistically highly significant. Capital exports declined by between 4.6% and 5.4% of GDP on average (capital imports by between 0.5% and 4.7%).

The effect of El Salvador introducing Bitcoin as legal tender on its cross-border capital flows

Bilateral monthly data from the Bundesbank’s statistics on international financial and capital transactions (SIFCT) suggest that El Salvador’s adoption of Bitcoin had a negative impact on cross-border capital flows with Germany. Chart 6.11 shows the regression results for the change in Germany’s bilateral outflows and inflows vis-à-vis El Salvador relative to the other four countries after the policy was introduced. Here, too, a distinction is made between a short-term (-/+ six months relative to September 2021) and a long-term (-/+ 12 months relative to September 2021) period. The dependent variables are expressed in levels and estimated using the Pseudo-Poisson Maximum Likelihood method. The estimated parameters are all negative and, for the most part, highly statistically significant, with the exception of long-term outflows. On average, outflows decreased by between 26% and 62% (inflows by between 47% and 63%). Thus, data from both the IMF and the Bundesbank suggest that the adoption of Bitcoin had a substantial negative impact on El Salvador’s cross-border capital flows. Further robustness checks using different time horizons or sub-categories of asset classes confirm the previous results.

The effect of El Salvador introducing Bitcoin as legal tender on its cross-border capital flows

The introduction of a privately issued, volatile crypto-asset as legal tender appears to have had a negative impact on El Salvador’s cross-border capital flows. El Salvador’s officially reported cross-border capital flows declined after the policy was introduced. The adoption of Bitcoin as legal tender had a negative impact on various asset categories, including foreign direct investments, debt securities and equities. One possible reason for this is heightened uncertainty. Alternatively, financial transfers that were previously officially recorded might have been replaced by unrecorded activities.

This analysis is based on a research paper by Goldbach and Nitsch (2024).
See Diario Oficial (2021).
See International Monetary Fund (2022).
See The Tico Times (2025).

3 Financial account

3.1 Underlying trends in capital flows

Germany’s net capital exports amounted to €239½ billion in 2024, which, like the current account balance, was thus up on the previous year’s level (€195½ billion). The remaining difference between the balances on the current account and the capital account on the one hand and the balance on the financial account on the other hand is attributable to statistical errors and omissions (€13 billion).

Major items of the German balance of payments

Against the backdrop of high political and economic uncertainty, enterprises continued to make relatively little direct investment internationally. According to preliminary UNCTAD data, global foreign direct investment (FDI) flows again remained subdued in 2024.[20] Despite an increase of as much as 11% on the year, FDI remained below the volumes usually recorded. The increase in global FDI was mainly concentrated in a number of European countries where specialised holding companies are located. These serve as a financial hub for cross-border capital flows and largely pass on to other groups any funds provided.[21] According to UNCTAD, adjusting FDI flows in these countries for potential double-counting shows that global FDI flows were again 8% lower than in the previous year. Direct investment flows to and from Germany were lower in 2024 than in 2023 as well.

In 2024, German portfolio investment with non-residents was mainly influenced by a looser, yet still restrictive, monetary policy on both sides of the Atlantic in the second half of the year. German investors showed a strong interest in foreign money market funds, which offered attractive amounts of interest income while being comparatively low in risk. However, higher-risk securities were also acquired. Interest in mutual fund shares (excluding money market funds) was particularly prominent, as they allow investors to take on a variety of risky securities without directly owning them. Conversely, foreign investors increasingly sought German public sector debt securities, with the primary intention of replenishing their holdings of Federal securities. In the years following the start of the asset purchase programmes in autumn 2014, foreign investors had sold Federal debt securities to the Eurosystem on balance. The turnaround that began in 2022 and the increased purchases by foreign investors since 2023 are now also reflected in the renewed rise in international free float.

Other investment is strongly influenced by banking system transactions and ended 2024 with net capital exports. Commercial banks’ net claims rose significantly on the year, while the Bundesbank’s net position remained virtually unchanged. However, the Bundesbank’s TARGET claims on the ECB, changes in which are also recorded under other investment, declined.

**Table 6.3: Financial account**
€ billion
Item	2022^r	2023^r	2024^r
Financial account balance¹	+ 150.7	+ 195.4	+ 239.4
1. Direct investment	+ 60.9	+ 24.2	+ 30.3
Domestic investment abroad²	+ 142.4	+ 95.8	+ 73.7
Foreign investment in the reporting country²	+ 81.5	+ 71.6	+ 43.4
2. Portfolio investment	+ 13.8	+ 2.2	+ 31.4
Domestic investment in foreign securities²	+ 11.6	+ 154.7	+ 219.8
Shares³	- 15.2	- 4.8	+ 4.8
Investment fund shares⁴	+ 32.3	+ 29.5	+ 112.1
Short-term debt securities⁵	+ 16.3	+ 6.5	+ 11.8
Long-term debt securities⁶	- 21.8	+ 123.5	+ 91.1
Foreign investment in domestic securities²	- 2.3	+ 152.5	+ 188.4
Shares³	- 5.7	- 13.2	- 5.6
Investment fund shares	- 3.3	- 2.2	- 1.6
Short-term debt securities⁵	- 33.8	+ 8.7	- 14.7
Long-term debt securities⁶	+ 40.6	+ 159.2	+ 210.3
3. Financial derivatives⁷	+ 44.6	+ 35.8	+ 42.0
4. Other investment⁸	+ 26.9	+ 132.5	+ 137.1
Monetary financial institutions⁹	- 93.6	+ 97.4	+ 107.4
Short-term	- 125.9	+ 104.8	+ 118.4
Long-term	+ 32.2	- 7.4	- 11.0
Enterprises and households¹⁰	+ 35.1	+ 60.6	+ 33.7
Short-term	+ 33.3	+ 77.0	+ 37.2
Long-term	- 18.1	- 19.3	- 17.9
General government	- 19.4	+ 8.6	- 7.2
Short-term	- 20.2	+ 2.7	- 3.5
Long-term	+ 0.8	+ 5.7	- 3.8
Bundesbank	+ 104.9	- 34.1	+ 3.2
5. Reserve assets	+ 4.4	+ 0.9	- 1.4
1 Increase in net external position: + / decrease in net external position: -. 2 Increase: +. 3 Including participation certificates. 4 Including reinvestment of earnings. 5 Short-term: original maturity of up to one year. 6 Long-term: original maturity of more than one year or unlimited. 7 Balance of transactions arising from options and financial futures contracts as well as employee stock options. 8 Includes, in particular, loans and trade credits as well as currency and deposits. 9 Excluding the Bundesbank. 10 Includes the following sectors: financial corporations (excluding monetary financial institutions) as well as non-financial corporations, households and non-profit institutions serving households.

Germany’s capital links with the United States

Germany has a positive net external position vis-à-vis the United States, especially with regard to equities and direct investment. At most, a loose relationship can be identified between bilateral current account balances and developments in the bilateral external asset position[1]. This is because the regional structure of international transactions and capital flows is determined by a large number of heterogeneous players with different motives.[2] In the past two years, Germany even recorded net capital imports vis-à-vis the United States while maintaining a positive current account balance (see Chart 6.13). This was due to investors from the United States purchasing German bonds on a large scale. A key factor in this context was that the European asset purchase programmes APP and PEPP were gradually being phased out and the Bundesbank was acquiring fewer and fewer of these securities. US investors replenished their portfolios of Bunds, which had shrunk in previous years.

Germany's bilateral balances with the United States

Measured in terms of capital links, the United States, alongside the United Kingdom, is Germany’s most important partner country outside the euro area. At the end of the third quarter of 2024, US assets accounted for 12.3% (€1,461 billion of €11,863 billion) of Germany’s international investment position (excluding financial derivatives). Including securities held indirectly via foreign investment companies, the share was an estimated 14.2%.[3] By comparison, investors from the United States held 12.1% of German external liabilities (€1,040 billion of €8,590 billion).

German investment in the United States

From the United States’ perspective, German investors are less important. At the end of the third quarter of 2024, German investors held 2.8% of US external liabilities (around 3.2% including indirect shareholdings). Their portfolios contained equities and investment fund shares worth US$507 billion, or 2.9% of the foreign-owned securities in this category. For US debt securities, the share held by German investors was 2.2% (US$334 billion).[4]

The stock of German FDI in the United States stood at €452 billion at the end of the third quarter 2024, with equity capital accounting for €359 billion of this total.[5] This corresponded to a little under one-sixth (15.8%) of the total equity capital included in German foreign direct investment. From the United States’ viewpoint, German direct investments accounted for 2.6% of total foreign equity capital invested in the United States.[6] As at this date, equity capital made available through US direct investments in Germany amounted to €116 billion (13.0% of total foreign equity capital in the form of direct investments in Germany).

The most important industries attracting German direct investment in the United States are the manufacturing sector and financial and insurance activities.[7] Within the manufacturing sector, the manufacture of chemical products as well as the production of computer, electronic and optical products and electrical equipment play a prominent role.

Germany’s bilateral international investment position vis-à-vis the United States has not risen any further since 2022. This was primarily due to developments in the bond market. Since then, German investors have not purchased any more US bonds on balance, while US investors have increasingly acquired German bonds. Amongst other things, this was due to changes in monetary conditions, which had the effect of making German and other European securities relatively attractive again. See Deutsche Bundesbank (2024f).
For example, if a German car manufacturer exports a vehicle to the United States, this initially creates an external claim on the US importer, which is typically settled by bank transfer. Under certain circumstances, the German vendor may not invest this asset in the United States, but instead purchase Italian government bonds. In this example, the original owner of these bonds acquires US dollars. At the end of these exchanges, Germany’s current account surplus with the United States would be elevated. Germany’s net external assets would have risen by the same amount, but vis-à-vis Italy rather than the United States. Italy’s net external assets would remain unchanged, but with higher claims on the United States and higher liabilities to Germany. The United States would ultimately record a higher current account deficit with Germany and higher external liabilities to Italy.
In addition, there are US securities held indirectly by German investors via investment funds. Investment funds in Luxembourg and Ireland in particular play a prominent role in this regard. At the end of the third quarter of 2024, 95% (€1,248 billion) of the investment fund shares held abroad by German investors had been issued by companies based in Luxembourg or Ireland. The investment focus of about 18% of these investment fund companies is in the United States (survey by Morningstar dated 22 January 2025). This suggests that, in addition, German investors indirectly held US securities worth around €225 billion in their portfolios.
In addition, there are the Bundesbank’s foreign reserves. These totalled €34 billion at the end of 2024, but there is no breakdown by currency.
This relates to directly held equity capital according to the international investment position. The stock is higher if the equity capital held indirectly via holding companies in third countries is also included. This information can be found in the Bundesbank’s foreign direct investment statistics up to the end of 2022. At that time, the difference was €50 billion.
Here it should also be noted that German companies have an indirect presence in third countries via holding companies in some cases.
Sector classification of the foreign subsidiary, FDI statistics data on primary and secondary FDI.

3.2 Foreign direct investment (FDI)

According to the German Chamber of Commerce and Industry, German enterprises’ plans for investing abroad in 2024 were rather cautious.[22] Alongside weak demand both at home and from abroad, the decreasing non-price competitiveness of Germany as a business location also came under growing scrutiny.[23] Compounding this were geopolitical risks and increasing protectionist tendencies, which enterprises have to take into account when making cross-border investments. The significant overall increase in uncertainty for the global economy thus posed particular challenges for German enterprises with regard to their cross-border investment decisions last year. In addition, in 2024, the cost savings motive also played a greater role again in direct investment planning, relative to previous years. However, the development and expansion of sales and customer services continued to be particularly strong drivers of German industrial enterprises’ foreign investment. Many enterprises assessed the economic outlook in business locations abroad as more favourable than the outlook in Germany.[24]

In this difficult economic environment, cross-border FDI flows to and from Germany resulted in net capital exports of €30½ billion in 2024, following €24 billion the previous year. However, the increase was once again driven by lower gross flows on both sides of the balance sheet. Both German outward FDI and inward FDI were down on their levels of the year before.

Overall, enterprises domiciled in Germany invested around €73½ billion in FDI last year, which was €22 billion less than in the previous year. German investors upped their equity capital in foreign enterprises by €60½ billion. This was mainly achieved by reinvesting earnings, whilst investment via equity capital in the narrower sense (i.e. additional or new equity investments) contributed around one-fifth to this amount. A number of services-oriented sectors were the main players here. German enterprises furthermore provided affiliated enterprises abroad with funds totalling €13½ billion net via intra-group lending. Measured in terms of volume, cross-border corporate takeovers in 2024 by firms domiciled in Germany lagged behind the previous year, while the number of transactions increased.[25]

Direct investment in the German balance of payments

The United States received the largest shares of funds, accounting for more than one-quarter of all German FDI in 2024. The business outlook was deemed predominantly positive by the German firms operating there.[26] The United States was thus once again particularly crucial to the business of internationally active enterprises domiciled in Germany (see the supplementary information on German capital links with the United States and the German current account surplus vis-à-vis the United States). At the same time, German enterprises provided affiliated enterprises in the United States with additional funds in this way. They mainly invested funds via equity capital, particularly in the narrower sense. On balance, they also granted large volumes of financial credit to affiliated enterprises in the United States.

More than one-third of German FDI benefited EU partner countries last year, with the majority going to other euro area countries. German FDI relationships in 2024 were largely shaped by higher outflows of funds to the Netherlands and Luxembourg as well as return flows from Belgium and Ireland, with some of these countries playing a key role as holding locations. In addition, within Europe, German enterprises provided affiliated enterprises in Switzerland and Sweden with a larger volume of direct investment funds.

Outside Europe, larger amounts were once again reinvested in affiliated companies in China via profits generated there. This trend, which has been observed for some time now, masks the fact that German parent companies have been reducing their equity capital in the narrower sense in China over the past few years; the same is true of 2024.[27] The supplementary information below (The role of geopolitical aspects for German foreign direct investments in partner countries) goes into greater detail about China’s indirect importance for German FDI via common partner countries.

The role of geopolitical aspects in German foreign direct investments in partner countries

This analysis presents a time-varying country-specific “geopolitical index” and investigates whether there is a correlation between this index and the foreign direct investments of German companies in partner countries. Since Russia began its war of aggression against Ukraine, there has been more intense discussion among politicians, academics and international organisations about the impact of geopolitical factors on international economic relations. The starting point of this analysis is the empirical observation that cross-border trade between countries belonging to the same geopolitical bloc has recently increased.[1] This trend has also been observed in foreign direct investment.[2]

The ECB has developed a “geopolitical index” that categorises countries into a Western, an Eastern and a neutral bloc.[3] The index ranges from zero to one, with a value of zero meaning that a country is very close to the United States geopolitically, while a value of one represents strong alignment with China (and Russia). Countries with a value of 0.5 are classified as neutral. Using these values, the ECB divides countries into three blocs: countries with values under 0.25 are classified as part of the Western bloc, those between 0.25 and 0.75 are classified as neutral, and those exceeding 0.75 as part of the Eastern bloc.[4]

The ECB’s “geopolitical index” incorporates data on sanctions, arms imports, trade routes (“New Silk Road”) and the results of a single United Nations vote. Specifically, it is based on the following data sets: information from the Global Sanctions Database on sanctions imposed by the United States, Russia and China against other countries;[5] arms imports from the United States, Russia and China from the SIPRI database;[6] whether and how long a country has been a partner in the expansion of China’s “New Silk Road” (“Belt and Road Initiative (BRI)”)[7] and the results of the vote at the eleventh emergency special session of the United Nations on 2 March 2022 concerning the Russian attack on Ukraine. Each of the four (sub-)indices is normalised so that the values are between zero and one, with a neutral value of 0.5. The arithmetic mean of all four values is then taken to obtain an aggregate index for each country.

This analysis uses time-varying annual data to examine how the “geopolitical index” of German partner countries and their economic and political relations with the United States, China and Russia have changed over time.[8] For this reason, the study considers both the results of the UN vote in March 2022 and the entirety of voting patterns in United Nations sessions from 1999 to 2022.[9]

While partner countries with which Germany is connected through foreign direct investment tend to align politically with the United States, they have increasingly also deepened their relations with China in recent years. Chart 6.16 illustrates the average geopolitical proximity of Germany’s partner countries for foreign direct investment to the United States (value = 0) and China/Russia (value = 1) over time, both unweighted and weighted by gross domestic product (GDP).[10] In general, Germany’s partner countries are politically closer to the United States, especially when the annual average is weighted by GDP.[11] However, the index has been rising, indicating that Germany’s partner countries have increasingly strengthened their ties with China in recent years.

Average “geopolitical index” of Germany's partner countries for foreign direct investment

The rise in the “geopolitical index” and the increased proximity between Germany’s partner countries and China (and Russia) are primarily driven by the “New Silk Road” subindex. Chart 6.17 shows the GDP-weighted average development of the four sub-indices. In 1999, the subindices predominantly reflected closer proximity to the United States, with the exception of UN voting patterns, which appeared more neutral. However, the upward trend of the lines generally suggests a certain increase in proximity to China (and Russia). In particular, participation in the “New Silk Road” has had a significant impact on the trajectory of the aggregate index since 2013.[12] However, the subindices for sanctions and arms deliveries also show an upward trend. Only the United Nations voting results have remained relatively stable over time, with some fluctuations.

The results of a panel estimation procedure suggest that there is a correlation between the “geopolitical index” and specific aspects of German foreign direct investment (total stock, equity capital, intra-group loans, turnover and employment). The study is based on the Deutsche Bundesbank’s Microdatabase Direct Investment (MiDi), which contains annual data for a total of 169 countries from 2002 to 2022.[13] The regressions are estimated using Pseudo-Poisson Maximum Likelihood (PPML) and are structured as follows:

$$Indicator_{it}=exp(α{_i}+β_t+γ×Index_{it}+σ×Growth_it+π×Country size_{it}+δ×Development_{it}+ε_{it})$$

where indicator_{it} represents the different dependent variables (total stock, equity capital, intra-group loans, turnover and employment) of country i in year t;\alpha_i and \beta_t capture country-specific and time-specific fixed effects[14]; growth_{it} controls for real economic growth, country size_{it} for the economic size of country (logarithmised nominal GDP in US dollars), and development {it} for the level of development of the respective economies (logarithmised nominal GDP per capita in US dollars). The key explanatory variable is index_{it}, which corresponds to the adjusted “geopolitical index” introduced above. The parameter \gamma thus indicates how an economic indicator changes in response to changes in the index. Standard errors are calculated using country-level clustering.[15]

The estimation results suggest that German companies increase their foreign direct investment in partner countries through intra-group loans when the “geopolitical index” rises. This could be due to the fact that many of these countries joined China's “New Silk Road” initiative starting in 2013.[16] Chart 6.18 illustrates the main findings of the regression analysis. Only the estimated coefficient for intra-group loans is significantly positive: if the index increases by 0.1 point, the average value of intra-group loans rises by approximately 16%.[17] German companies may be seeking to profit economically from the “New Silk Road” by expanding their foreign investment. In contrast, the estimated parameters for the total stock of foreign direct investment, equity capital, turnover and employment are insignificant, meaning that the “geopolitical index” does not have an impact on these variables.

The empirical results should be interpreted with a degree of caution. The dataset analysed only goes up to 2022, meaning later developments were not taken into account. For example, Italy withdrew from the “New Silk Road” project in 2023.

See International Monetary Fund (2023).
See International Monetary Fund (2024).
See den Besten et al. (2023).
The ECB uses this categorisation to analyse the degree to which foreign direct investment is interconnected. See Boeckelmann et al. (2024).
See Felbermayr et al. (2023).
SIPRI Arms Transfers Database.
See Nedopil (2023).
The final data set contains information on 169 countries. By comparison, the geopolitical (monthly) country-specific risk indices developed by Caldara and Iacoviello (2022), frequently cited in empirical research, include only 44 countries.
See Voeten et al. (2009).
The dataset does not include the United States, China or Russia. This applies to both the descriptive charts and the panel regressions.
This also holds true when the index is weighted by foreign direct investment rather than GDP.
The variable is binary, indicating that a country either takes part in the “New Silk Road” (assigned a value of one) or does not (assigned a value of zero). As countries have participated in the project at different times, the variable fluctuates both across countries and over time. Italy withdrew from the project in 2023. However, this is not relevant for the present analysis, as data on foreign direct investment are only available through 2022.
In order to balance the panel, the dependent variables are assigned a value of zero when no observation is available. For real economic growth, country size and development level, the initial value is also set to zero and then carried forward on an annual basis until a new value becomes available. This new value is then carried forward. If the initial value of the index is unavailable, it is set to 0.5. Subsequently, the same method is applied as for the other explanatory variables.
Both fixed effects capture economically significant aspects. The time-specific fixed effects control for the general upward trend in foreign direct investment across all countries over time, while the country-specific fixed effects account for whether a country is generally more economically aligned with the United States or with China/Russia. The estimations thus account for level effects, as illustrated in Chart 6.17.
Panel data which track a fixed set of countries over time often show correlations within each country across time. Clustering the standard errors by country takes these temporal dependencies into account and provides more robust estimates.
Separate estimations using only the “New Silk Road” subindex, however, do not yield statistically significant results. One possible reason for this is the low volatility of this binary index, which also only becomes relevant from 2013 onward.
Robustness checks for a subset of newly founded (or acquired) affiliates show that the “geopolitical index” has no significant impact on either total foreign direct investment or equity capital. However, intra-group loans remain significantly positive.

In 2024, there was a net inflow of €43½ billion of FDI funds to Germany, primarily via equity capital in the narrower sense and, to a lesser extent, via intra-group lending. Overall, this was markedly less than in the previous year, when foreign investors’ new exposure in Germany amounted to €71½ billion. However, a trend seen in previous years continued as of 2023, signalling a decline in foreign investment in Germany via FDI. This development also contributed to the discussion on how Germany’s role as a business location could be reinforced. FDI data themselves do not yet allow any clear conclusions to be drawn with regard to the reasons for the developments over the past few years – both cyclical and structural factors are likely to have played a role.[28] A study conducted by the Bundesbank shows that the competitiveness of Germany as a business location has been deteriorating for several years now. In particular, non-price competitiveness has declined, indicating structural problems.[29]

In 2024, around 70% of German FDI came from enterprises based in euro area partner countries. The main sources of this were cross-border inflows of funds from Luxembourg, the Netherlands and Ireland. In addition, there were large FDI inflows to Germany from Switzerland and Norway. Outside Europe, affiliated companies from the United States were particularly important investors for German firms. On balance, just under one-third of total FDI came from the United States, and this was largely invested in equity capital in the narrower sense. The inflows of FDI to Germany were partly offset by larger return flows to some countries, such as the United Kingdom and Cyprus. This was due to the fact that intra-group lending was dominated by repayments of previously granted loans.

3.3 Portfolio investment

Major central banks’ monetary policy stance remained restrictive in 2024 despite interest rate cuts from mid-2024 onwards. The ECB reduced its key interest rates by 25 basis points for the first time in June, followed by three further interest rate steps of the same size by the end of the year.[30] The Fed began to lower its policy rates in September, initially significantly by 50 basis points, followed by 25-basis-point steps in November and December. As the disinflation process was only gradual, interest rates remained restrictive.

Portfolio investment in the German balance of payments

Germany’s cross-border portfolio investment resulted in net capital exports of €31½ billion in 2024. In the previous year, when gross sales were significantly lower, Germany had recorded net outflows of €2 billion in portfolio investment. Transaction growth was largely attributable to “Brexit banks”, i.e. foreign institutions that had expanded their business areas in Germany following the United Kingdom’s withdrawal from the EU. The fact that the Eurosystem completely discontinued its reinvestments by the end of the year was another factor. The Eurosystem had already halted reinvestments under the expanded asset purchase programme (APP) in 2023. As of July 2024, it also no longer reinvested maturing securities from the pandemic emergency purchase programme (PEPP) portfolio holdings in full and reduced its purchases to zero by the end of the year. The individual national central banks thus left the market as a buyer group. As a result, government debt securities now need to be absorbed again by the private sector, which has pushed up free float, i.e. the stock of freely tradeable securities. In addition, some euro area countries issued significantly more bonds than in the previous year, which increased the supply of these securities.

The positive balance in portfolio investment was attributable to domestic investors’ high levels of investment abroad. At €220 billion, they acquired significantly more foreign securities in 2024 than in the previous year (€154½ billion). This was particularly true of money market funds and other foreign mutual fund shares (together totalling €112 billion). One reason for the high demand for interest-bearing instruments was the comparatively high foreign interest rates. The euro had also come under pressure due to the strong interest rate differential with the US dollar, making investment in the United States even more attractive. Equity-related mutual fund shares benefited from the comparatively favourable economic outlook in the United States and some European partner countries. This is consistent with the fact that US technology shares listed in the Nasdaq appreciated considerably over the course of the year, outperforming most of the bullish global equity indices.

At €103 billion, demand for foreign debt securities declined in 2024, but was still relatively high. Just under two-thirds of purchases consisted of euro-denominated bonds on balance, which was markedly lower than in 2023 but exceeded the figures for all other years since the APP was launched. On an average of the years 2015 to 2022, German investors had invested only €18 billion net in such securities – indeed, in some years, they had even sold securities. The exceptionally high demand in 2023 is likely to have been due to German investors having already increased their portfolios of euro bonds substantially when the APP was discontinued. Investors therefore believed they had some catching up to do. Furthermore, German investors purchased foreign currency bonds (€24½ billion) and money market paper (€12 billion) in 2024. Demand was up slightly on the year in both segments. Looking back, foreign currency bonds benefited from positive valuation effects owing to the weakness of the euro vis-à-vis major trading partners. In nominal effective terms, the euro depreciated by 1½% in 2024.[31]

Conversely, non-residents purchased German securities worth €188½ billion net, the highest value since the global financial crisis. The last time international investors had shown even greater interest in German paper was in 2007. Last year, they purchased long-term debt securities worth €210½ billion, with public bonds making up the lion’s share. The strong demand for German government securities was fostered by the Eurosystem phasing out its reinvestments, which made this type of securities more readily available in the market. This was reflected in a diminishing scarcity premium. In recent years, Federal bonds (Bunds) had particularly high scarcity premia due to their popularity as collateral and as a means of holding liquidity.[32] However, as the risk appetite of many investors also increased, foreign demand for private bonds issued in Germany was also significantly higher.

As in the previous year, foreign investors disposed of German shares (€5½ billion, 2023: €13 billion). On balance, international investors were not interested in shares of companies domiciled in Germany, despite high price gains on the German stock exchange. This may have been due to economic agents assessing the economic outlook in Germany as weak in both economic and structural terms. In this setting, investors clearly preferred – in net terms – to take advantage of price gains in the German equity market rather than to continue investing in German enterprises. Contrary to the trend, investors from the United States acquired German shares (€5½ billion), while the highest sales were recorded in the United Kingdom (€4 billion), Luxembourg (€3½ billion) and the Netherlands (€3½ billion). However, as these three countries are important international financial centres, these transactions are likely to have been driven mainly by market participants from third countries, including domestic investors.

Financial derivatives (which are aggregated into a single item in the balance of payments) recorded higher net capital exports than in the previous year. They amounted to €42 billion, following €36 billion in 2023. Options trades were the main factor contributing to the outflow of funds.[33] Forward and futures contracts relating to gas increased by around one-quarter in 2024 compared with the previous year. However, this meant that they remained well below the balance of 2022, which had risen sharply as a result of Russia’s war of aggression against Ukraine.

3.4 Other investment

Other investment recorded net capital exports of €137 billion in 2024, almost the same as in the previous year.[34] However, developments on the assets and liabilities sides differed between the two years. Liabilities to non-residents fell sharply in 2023, while claims on non-residents rose significantly in the reporting year 2024. Such changes are typical in other investment. In particular, the holdings of currency and deposits in the banking system are subject to sharp fluctuations and are often accompanied by individual institutions expanding or reducing their balance sheets. Netted items are therefore generally more meaningful. That said, it is important to keep an eye on assets and liabilities; they can provide important information on the underlying payment flows and on possible changes in the financial infrastructure. Examples of this include the sharp increase in gross transactions following the United Kingdom’s withdrawal from the EU and the settlement of the Eurosystem’s asset purchases via TARGET.[35]

Other investment in the German balance of payments

The net capital exports of monetary financial institutions (excluding the Bundesbank) to non-residents amounted to €107½ billion in 2024. Claims on foreign institutions arising from currency and deposits rose particularly significantly. Claims on group-affiliated banks had a particular bearing here: such arrangements are often based on business management decisions relating to liquidity management. Commercial banks’ claims on non-residents also increased sharply as a result of financial loans being granted to enterprises and households. Conversely, foreign players increased their deposits with German institutions, consisting of deposits from banks abroad as well as enterprises and households domiciled abroad.

Bundesbank accounts recorded net capital exports of €3 billion last year. The Bundesbank’s gross claims and gross liabilities vis-à-vis non-residents each declined to a similar extent in 2024. TARGET claims on the ECB fell by €47 billion, which was less than in 2023 (€175½ billion). This is because the winding-down of monetary policy securities portfolios in the context of tighter monetary policy has not reduced German TARGET claims since mid-2023 as significantly as they had previously risen when the balance sheet was being built up under the asset purchase programmes.[36] One reason for this appears to be a change in investor behaviour in the market for euro-denominated government bonds. In other euro area countries, for example, domestic investors in particular recently purchased the newly issued national government bonds. Unlike with purchases by investors from third countries, which are often settled via Germany, no central bank liquidity flowed out of Germany in this case. Another reason for this was the supply effect for Bunds described above. Once the Eurosystem had phased out its monetary policy asset purchases, private investors were able to restock their supply of Bunds more easily, as outlined above. This resulted in an exceptionally strong demand from abroad for German Federal securities, for example. Where investors from other euro area countries acquired these securities, central bank liquidity flowed to Germany, which, when viewed in isolation, increased Germany’s TARGET balance.[37]

3.5 Reserve assets

The Bundesbank’s reserve assets decreased by €1½ billion in 2024 on account of transactions. On balance, this was mainly due to lower claims on other reserve assets and a decline in the reserve position in the IMF.

The international reserve holdings are also influenced by balance sheet adjustments which, in compliance with internationally agreed accounting standards, are not recognised in the balance of payments. The end-of-year revaluation of the reserve assets resulted in an increase of just under €73 billion in 2024. This was due chiefly to an increase in gold prices compared to the previous year. On the reporting date of 31 December 2024, the value of Germany’s reserve assets stood at €363½ billion.

The balance of payments data on which this article is based were published on 14 March 2025. They include foreign trade data from the Federal Statistical Office, which were published on 19 February 2025.

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Mathematical differences between the current account balance (including capital transfers) and aggregate net lending/net borrowing may occur due to different statistical sources, calculation methods and revision dates.
These deliveries included military goods, dual-use goods, and relief aid totalling €7.1 billion; see Federal Government (2025). However, in the context of total German exports, the significance of exports to Ukraine remains very low, accounting for ½%.
See Federal Network Agency (2025).
The bulk of gas exports consist of previous gas imports.
See Deutsche Bundesbank (2024d).
See Sauer and Wohlrabe (2024).
See Deutsche Bundesbank (2024a).
See Deutsche Bundesbank (2024e).
See Deutsche Bundesbank (2024b).
The foreign trade data do not allow any inferences to be made with regard to a change in the dependence on critical, often low-value inputs of Chinese manufacture. A survey conducted by the ifo Institute last year indicates that German firms were scaling back their purchases of important inputs manufactured by Chinese firms compared with a survey conducted in 2022, shortly before the war in Ukraine broke out. However, given that almost two-fifths of firms in the manufacturing sector continue to rely on these inputs, they are still fairly dependent. See Baur and Flach (2024). For further analyses of the German economy’s dependence on products from China, see Deutsche Bundesbank (2023a, 2023b).
This was mainly due to lower import volumes of refined petroleum products and metals. In 2023, Russia’s share of total German imports had already fallen to just ¼%, down from 2¾% in 2021.
This was due to lower coal consumption, as non-fossil fuels, including those from abroad, were cheaper, meaning that less electricity was generated in German coal-fired power plants. See German Association of Energy and Water Industries (2024).
Electricity consumption in Germany increased slightly; electricity exports cumulatively fell by almost as much over the year.
The pandemic years of 2020 and 2021, when a small surplus was generated in services trade, were one exception. This was primarily due to the lack of foreign travel expenditure by residents, which is normally responsible for the large deficit.
These include transport, manufacturing, maintenance and construction services, charges arising from the use of intellectual property, IT, telecommunications and information services and other business services.
Sales in global trade in goods slightly more than doubled over the same period.
With regard to the services account, there are other sub-items, in particular financial and insurance services, where net income rose somewhat.
This sub-account captures unilateral international money flows. These include government expenditure such as contributions to international cooperation and contributions to international organisations, but also government revenue such as taxes on the domestic investment income of foreign investors. In trade and industry, high cross-border payments of insurance premiums and insurance benefits play a major role, both on the revenue and the expenditure side.
See Deutsche Bundesbank (2024a).
See United Nations Conference on Trade and Development (2025).
These include Ireland, Luxembourg, the Netherlands, Switzerland and the United Kingdom.
See German Chamber of Commerce and Industry (2024a).
See Deutsche Bundesbank (2025a).
See German Chamber of Commerce and Industry (2024a).
Realised takeovers of firms domiciled abroad and previously under foreign ownership – and a German stake of at least 10% after the transaction – accounted for around €11½ billion in 2024; this was significantly less than in 2023, when the value of the takeovers was reported at around €24 billion (data based on LSEG Workspace, data extracted as at 26 February 2025). The time at which mergers and acquisitions are captured in the balance of payments can, however, differ from that recorded by LSEG Workspace, meaning that the reported figures are not directly comparable.
See German Chamber of Commerce and Industry (2024b, 2024c).
See Deutsche Bundesbank (2024g).
See Deutsche Bundesbank (2024e, 2024g).
See Deutsche Bundesbank (2025a).
In February and March 2025, the Governing Council of the ECB decided on two further interest rate cuts, meaning that the deposit facility rate currently stands at 2.5% (as at 14 March 2025).
The nominal effective exchange rate comprises the weighted exchange rates of the 18 trading partners most important to the euro area economy.
See Deutsche Bundesbank (2025b).
This was mainly due to compensatory intra-group transactions in the form of over-the-counter options for transactions in structured short and long-term debt securities from German issuers. See Deutsche Bundesbank (2021).
The other investment account comprises loans and trade credits (where these do not constitute direct investment) as well as bank deposits and other investment.
See Deutsche Bundesbank (2022, 2017).
See Deutsche Bundesbank (2024f, 2017).
For more information and further details on the reasons for the development of Germany’s TARGET balance, see Helmus and Mitzlaff (2024).

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