German current account surplus to hit record high, world’s largest in 2016 – IFO

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Berlin | Published: September 6, 2016 3:39:59 PM

Germany's current account surplus will likely hit a new record of $310 billion (278 billion euros) in 2016, overtaking that of China again to become the world's largest, the Munich-based Ifo economic institute said on Tuesday.

"The German current account surplus is based on trade in goods," Ifo economist Christian Grimme said, adding that exports exceeded imports by 9 billion in the first half of the year, mainly due to strong demand from other European countries. (Source: Reuters)“The German current account surplus is based on trade in goods,” Ifo economist Christian Grimme said, adding that exports exceeded imports by 9 billion in the first half of the year, mainly due to strong demand from other European countries. (Source: Reuters)

Germany’s current account surplus will likely hit a new record of $310 billion (278 billion euros) in 2016, overtaking that of China again to become the world’s largest, the Munich-based Ifo economic institute said on Tuesday.

“The German current account surplus is based on trade in goods,” Ifo economist Christian Grimme said, adding that exports exceeded imports by $159 billion in the first half of the year, mainly due to strong demand from other European countries.

The institute said the German surplus would be equivalent to around 8.9 percent of gross domestic product, meaning it would once again breach the European Commission’s recommended upper threshold of 6 percent.

Brussels and Washington have urged Berlin to lift domestic demand and imports to help reduce global economic imbalances and fuel global growth, including within the euro zone.

IMF Managing Director Christine Lagarde and the U.S. Treasury have both called on Berlin to stimulate domestic demand to facilitate a rebalancing.

Berlin has rejected such criticism, saying it already lifted domestic demand by introducing a national minimum wage in 2015 and agreeing on a strong hike in pension entitlements in 2016. In addition, the government has increased state spending on roads, digital infrastructure and migrants while sticking to its goal of keeping a balanced budget.

China’s current account surplus is likely to shrink by $70 billion to some $260 billion this year due to weaker exports, Ifo said. Japan would be in third place with an estimated surplus of $170 billion dollar in 2016.

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