Germany’s world-beating current account surplus most likely hit a new record in 2013 of about $260 billion as much of its earnings from exported goods was invested abroad rather than spent at home, the Ifo think tank said.
Germany’s surplus was far higher than that of the world’s leading exporter, China, which was in second place with $195 billion, Ifo said, and was equivalent to 7.3 percent of gross domestic product (GDP), once again breaching the European Commission’s recommended upper threshold of 6 percent.
“Germany was the biggest exporter of capital in the world,” Ifo told Reuters in an emailed response to questions.
“Current account surpluses measure the part of a country’s savings that is not invested at home. Instead of investing a lot at home, Germany exported a large part of its savings abroad.”
Exports are traditionally the motor of Germany’s economy and critics argue Berlin must do more to spur domestic demand and imports to reduce global economic imbalances and fuel growth worldwide.
The U.S. administration reprimanded Germany in strong terms last year in its semi-annual report to Congress for its economic imbalances.
Yet Germany argues it has more than halved its current account surplus with the euro zone as a share of GDP since 2007 and it is relying more on domestic demand than trade to drive growth at the moment.
“The rise in the current account surplus is due to countries beyond the euro currency bloc, indeed the surplus with euro countries even shrank,” Ifo said. “For the first time since reunification, Germany likely achieved a slight surplus vis-a-vis China in 2013.”
The Munich-based institute, which each month publishes Germany’s market-moving business sentiment survey, said it expected the current account surplus to rise further to 7.4 percent of GDP this year due to a pickup in global trade.
The European Commission introduced a 6 percent threshold in late 2011 along with its macroeconomic imbalance procedure which seeks to prevent harmful imbalances among European member states by ensuring appropriate and coordinated policy responses.
Officials have, however, previously said a surplus is preferable to a deficit so action is less likely to be taken against countries exceeding the 6 percent limit than against those with a deficit below the -4 percent lower limit. (Reuters)