Few industrial groups contribute massively to Denmark's balance of payments surplus

For a long period, Denmark has had a surplus on the balance of payments. The manufacturing industry contributes massively to the balance of payments surplus because the sector has extensive net exports of goods. Danish industrial groups have increasingly become globally organised producing goods across borders.

Accordingly, there is a close correlation between the manufacturing industry’s investments in foreign subsidiaries and Danish exports and investment income that impacts the balance of payments statistics.

As part of the examination of the international organisation of industrial groups and their significance to the Danish economy, this analysis examines investments abroad and the groups’ total contribution to the balance of payments surplus in 2018. To illustrate the presence abroad, we apply a new approach to examine the ultimate destinations for the industrial groups’ investments.

Main conclusions:

• The contribution by just five large industrial groups to the balance of payments surplus corre­sponds nearly to the entire Danish balance of payments surplus in 2018.
• The industrial groups’ total contribution to the balance of payments was DKK 297 billion in 2018, which is almost twice the total balance of payments surplus.
• The surplus is driven by goods exports of which an increasing part never crosses the Danish border, because the goods are produced by subsidiaries abroad.
• Danish industrial groups have substantial investments in subsidiaries abroad. Complex group structures often lead to investments passing through several countries before they reach their final destinations.
• A new method for calculating ultimate hosting countries for the investments shows that par­ticularly investments in China and Russia are channelled through other countries.