IFO: Germany ‘sweeps’ global competition with the largest balance of payments surplus again this year

Germany will again record the largest surplus on the current account of the balance of payments in global competition this year, although it will be somewhat smaller than last year, estimates the Ifo economic institute on Thursday.

The International Monetary Fund (IMF) and the European Commission (EC) have been urging official Berlin for years to stimulate domestic demand and imports in order to reduce global economic imbalances and increase global economic growth, including in the eurozone.

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U.S. President Donald Trump has also criticized Germany, claiming that it is not doing enough to reduce the surplus in trade with the U.S. He accused Berlin of having a “very bad” trade policy.

German Chancellor Angela Merkel dismissed the objections, stating that thanks to Berlin’s economic and fiscal policy, personal and public consumption have already become the main drivers of growth for the largest European economy.

The Chancellor also emphasized that the German surplus is mainly the result of the interaction of supply and demand in global markets and that Berlin can only influence other important factors, such as the euro exchange rate and energy prices, to a limited extent.

Ifo estimates that the surplus on the current account of Germany’s balance of payments will amount to $285 billion this year, again the highest in the world. China will be in second place with approximately $190 billion and Japan in third with $170 billion.

– The overall German surplus is mainly a result of trade flows, states the analysis of the German institute, noting that German exports in the first half of the year surged due to stronger demand from other eurozone countries, as well as from the rest of the European Union and the U.S.

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This year, the German surplus on the current account of the balance of payments expressed as a share of GDP will slide to 7.9 percent, compared to 8.3 percent last year, estimates Ifo, citing higher energy prices as the main reason.

However, their estimates mean that Germany will again exceed the recommended maximum balance of payments surplus in the European Union of six percent of GDP this year.