Net International Investment Position By Les Nemethy, CEO, Euro-Phoenix Financial Advisors Ltd. and former World Banker

Net International Investment Position (“NIIP”) is an ever-so-important but ever-so-seldom used indicator of a country’s financial health, you might say, its financial net worth.
So what is NIIP? NIIP is the difference between a country’s
  • external financial assets (including assets held abroad by a country’s residents and corporate affiliates); and
  • liabilities of that country (including Government and private debt, and corporate shares by foreign nationals).
You might say NIIP expresses the financial net worth of a country. A positive balance indicates the country is a creditor nation, a negative balance indicates it is a debtor nation. It is often expressed as a percentage of a country’s GDP.

The following chart sets out the NIIP of countries readers are likely to find interesting:

Countries Date GDP[3] (US$MM) Date NIIP[4] (US$MM) Date NIIP (%GDP)
 Austria 2021 481,796 2021Q1 +58,662 2021Q1 13.4[5]
 Belgium 2021 578,996 2021Q1 +263,132 2021Q1 49.5[5]
 Bulgaria 2021 77,782 2021Q1 -17,228 2021Q1 −24.0[5]
 Canada 2021 1,883,487 2021Q1 +1,105,744 2021 58.7
 China, People’s Republic 2021 16,642,318 2021Q1 +2,140,041 2021 12.9
 Croatia 2021 65,217 2020 -31,558 2021Q1 −50.0[5]
 Czech Republic 2021 276,109 2021Q1 -24,507 2021Q1 −9.6[5]
 France 2021 2,938,271 2021Q1 -889,171 2021Q1 −32.7[5]
 Germany 2021 4,319,286 2021Q1 +3,055,922 2021Q1 78.4[5]
 Greece 2021 209,857 2021Q1 -352,272 2021Q1 −182.7[5]
 Hong Kong 2021 368,633 2021Q1 +2,163,155 2021 586.8
 Hungary 2021 176,543 2021Q1 -74,450 2021Q1 −47.8[5]
 Iceland 2021 24,155 2021Q1 +8,466 2019(Q1) 21[6]
 Ireland 2021 476,663 2020Q3 -705,962 2021Q1 −168.7[5]
 Israel 2021 446,708 2021Q1 +190,555 2021 42.7
 Italy 2021 2,106,287 2021Q1 +40,176 2021Q1 2.1[5]
 Japan 2021 5,378,136 2021Q1 +3,375,849 2021 62.8
 Montenegro 2021 5,651 2018 -9,044 2018 −178.8
 Netherlands 2021 1,012,598 2021Q1 +959,049 2021Q1 102.3[5]
 Norway 2021 444,519 2021Q1 +1,175,781 2021 264.5
 Poland 2021 642,121 2021Q1 -254,623 2021Q1 −43.0[5]
 Romania 2021 289,130 2021Q1 -121,438 2021Q1 −48.0[5]
 Russia 2021 1,710,734 2021Q1 +458,533 2021 26.8
 Serbia 2021 60,435 2021Q1 -49,970 2019 −88.5
 Singapore 2021 374,934 2021Q1 +1,035,082 2021 276.1
 Slovakia 2021 117,664 2021Q1 -67,785 2021Q1 −63.0[5]
 Slovenia 2021 59,132 2021Q1 -4,876 2021Q1 −12.5[5]
 Spain 2021 1,461,552 2021Q1 -1,096,594 2021Q1 −84.1[5]
 Sweden 2021 625,948 2021Q1 +116,427 2021Q1 20.3[5]
  Switzerland 2021 824,734 2021Q1 +808,373 2021 98.0
 Turkey 2021 794,530 2021Q2 -280,624 2021 −35.3
 United Kingdom 2021 3,124,650 2021Q1 -802,202 2021 −25.7
 United States 2021 22,675,271 2021Q1 -14,320,275 2021Q1 −64.9

So what does a scan of the above numbers tell us?

There are a number of NIIP superstars, countries which have NIIP’s in excess of 100%. These include Hong Kong, Singapore, Norway, Netherlands, etc. These countries are not only affluent; high NIIP also provides resilience to weather crises.

Then there are the NIIP stragglers, like Montenegro, Greece, and surprisingly Ireland, that have NIIP’s of less than -100%. (Ireland is apparently a special case, driven by the decisions od multinationals to domicile intellectual property there). In times of crisis, especially if foreigners were to liquidate their positions in those countries’ assets, those countries could fare quite negatively.

Interesting to note that Central European countries are typically mid to lower end of the, with Austria slightly positive (13.4%), Czech Republic and Slovenia slightly negative (-9.6% and -12.5% respectively), then Hungary, Poland and Croatia (in the -40 to -50% range), with Bulgaria and Romania further behind.

While Japan has a respectable NIIP as a percentage of GDP (62.8%), the substantial size of its economy gives it the single largest NIIP in absolute terms (USD 3.376 trillion).

It is interesting also to note the position of the major powers: US, China and Russia. Both Russia and China are have positive NIIP’s, while the US has a whopping -64.9% NIIP. This may be considered surprising, given the vast debt and equity holding of US institutions (including multinationals) abroad, but the level of US debt held by foreigners, and holdings in US shares by foreigners is even larger. While substantially negative US NIIP is not likely to be a cause for concern in the short-term, thanks to a positive spread between what US investors earn abroad compared to what foreign investors earn in the US, the US could be put into a very tough spot if interest rates were to suddenly experience a major rise. Also, the trend in US NIIP has been negative over time—if the trend continues, there may come a point where foreign investors lose confidence. If you look at the chart above, the absolute number of US NIIP is so overwhelming (some USD 14 trillion), a loss of confidence would have global ramifications.

NIIP can be an interesting tool or metric for future:
  • when doing an acquisition or investment, it could be useful to know the NIIP of the country in which you are investing, from a risk management perspective.
  • A measure of government performance is debt as a percentage of GDP. Perhaps NIIP would be at least as useful a metric.

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