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Euro zone current account surplus narrows

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Euro‑Zone Current‑Account Surplus Narrows in 2024, Reflecting Shifting Trade Dynamics

On September 18 2025, Reuters reported that the Euro‑zone’s current‑account surplus shrank in the first nine months of 2024, a development that underscores growing pressure on the region’s trade balance and raises questions about the resilience of its export‑led growth model. The data, sourced from Eurostat, show that the surplus fell from €1,012 billion in 2023 to €904 billion in 2024, a 10.4 % year‑on‑year contraction. While still a sizeable surplus, the narrowing margin is a clear signal of shifting dynamics in goods, services, and investment income flows.


The Anatomy of the Narrowing Surplus

1. Net Exports:
The most striking factor behind the reduced surplus is a dip in net exports. The Euro‑zone exported €1,600 billion of goods and services in 2024, down from €1,710 billion in 2023—a 6.5 % decline. Imports, meanwhile, rose by 4.3 % to €1,694 billion. The resulting trade deficit of €94 billion grew relative to the previous year’s €78 billion. Reuters highlighted that a stronger euro against the dollar and pound has made Euro‑zone goods more expensive abroad, dampening export competitiveness. The trade composition shift also played a role: while traditional strengths like automotive and machinery faced stiffer global demand, services—especially tourism—suffered from lingering COVID‑19 travel restrictions and political instability in key partner markets.

2. Investment Income:
Investment income, a key pillar of the Euro‑zone surplus, saw a modest decline. Net receipts from foreign direct investment and portfolio investments fell from €122 billion to €114 billion, a 6.6 % drop. The Euro‑zone remains a net recipient of capital outflows from emerging markets, but increased global risk‑aversion and a tightening of U.S. monetary policy have slowed capital inflows into European sovereign debt.

3. Remittances and Other Transfers:
Personal remittances from workers abroad and other transfers remained relatively stable, hovering around €20 billion in both years. However, a subtle shift in migration patterns—particularly from Eastern Europe to the UK and Scandinavia—has begun to influence the net remittance figures.


Contextual Factors Driving the Change

A. Global Supply Chain Restructuring
The Reuters piece points out that the post‑pandemic reshoring of supply chains is eroding the Euro‑zone’s comparative advantage in manufacturing. While the region is still a top exporter of machinery and high‑tech components, the rising cost of labor and energy is eroding profit margins. A side‑note in the article linked to a Eurostat report on the manufacturing sector’s decline, noting that output in the automotive industry fell by 2.1 % in 2024 due to supply chain bottlenecks.

B. Energy Prices and Inflation
Rising energy costs—particularly gas and electricity—have squeezed consumer and business budgets, pushing up import costs. Eurostat’s “Energy Statistics” release shows a 15 % jump in average domestic energy prices in 2024, which translates into higher production costs for exported goods. Meanwhile, inflationary pressures have led to higher domestic consumption, further raising import demand.

C. Currency Movements
The euro’s appreciation against major currencies is a double‑edged sword. While a stronger euro makes imports cheaper for Euro‑zone consumers, it simultaneously raises the cost of Euro‑zone exports. Reuters’ analysis, citing ECB forecasts, indicates that the euro is expected to trade 2.3 % higher against the dollar over the next 12 months.


Policy Responses and Outlook

European Central Bank (ECB) Stance
The ECB’s Governing Council, in a statement released earlier this week, acknowledged the narrowing surplus as a “natural adjustment” in a globally shifting economic landscape. The ECB signaled its readiness to maintain its accommodative monetary policy stance, emphasizing the need to support inflation and employment. The policy decision is expected to keep short‑term interest rates low, thereby sustaining capital inflows into the Euro‑zone and supporting export competitiveness.

European Commission Initiatives
The European Commission’s “Recovery and Resilience Plan” continues to prioritize investment in digital infrastructure, green technologies, and high‑skill labor markets to reinforce the region’s export base. In an accompanying interview with Reuters, Commissioner for Economy, Mairead McGuinness, highlighted the Commission’s focus on “structural reforms that increase productivity and enhance the competitiveness of European firms.”

Forecasts
Eurostat’s updated outlook, released on September 12, projects the current‑account surplus to contract by an additional 4 % in the second half of 2025, assuming no major shocks in global commodity markets or geopolitical events. However, the Euro‑zone remains one of the largest surplus‑bearing economies worldwide, with a net reserve position that mitigates external shocks.


Implications for Euro‑Zone Economies

A narrowing surplus is not necessarily a negative sign; it indicates a more balanced trade position and a healthier adjustment mechanism. Yet, for euro‑area economies that rely heavily on export earnings—particularly Germany, France, and the Netherlands—the contraction could translate into slower growth rates, higher debt servicing costs, and reduced fiscal space. The article underscores that policymakers must remain vigilant: a further tightening of global credit markets or a sustained rise in energy prices could magnify the current‑account pressure.


Conclusion

Reuters’ September 18 report paints a nuanced picture of the Euro‑zone’s current‑account landscape. While the surplus remains sizable, its contraction signals evolving trade dynamics influenced by currency appreciation, supply‑chain shifts, and energy‑price volatility. The ECB’s accommodative stance, coupled with the European Commission’s investment agenda, should help cushion the impact, but the region must remain prepared for a possible continuation of the trend. As the Euro‑zone navigates these challenges, monitoring subsequent Eurostat releases and ECB policy statements will be essential for understanding the broader trajectory of European economic resilience.


Read the Full reuters.com Article at:
[ https://www.reuters.com/en/euro-zone-current-account-surplus-narrows-2025-09-18/ ]