According to reports published in the German media, despite the increasing international criticism of Germany’s growth model based on exports, the country is set to report the largest current account surplus in the world in 2018.
The reports were based on the conclusions of the study that calculated that in 2018, the German economy would be able to attain a current account surplus of $299 billion. the study was conducted by the Munich-based Ifo Institute for Economic Research.
The report also issued a list of countries that would end up with huge surpluses and calculated that Japan would clock a surplus of $200 billion and the Netherlands at $110 billion.
The balance of trade (imports and exports) and net income (or losses) from international investments for a country is measured by the current account and therefore is an important economic indicator. The growth in the volumes of goods that Germany exports a\would drive the country’s surplus in 2018m the report explained.
There has been lasting strong demand from foreign customers in the eurozone, the wider European Union (EU) and the United States which has driven Germany’s surplus on trade in goods this year, claimed Ifo expert Christian Grimme.
However, Grimme also noted that more income on international investments was earned by Germany compared to the volume of funds transferred to other countries which was also a contributing factor for the German capital account set to record an $18 billion surplus.
The overall surplus of the economy was weighed down on by a traditional deficit on international trade of services which is expected to be at a negative 18 billion euros in stark contrast to the trend in the goods trade and capital accounts.
Grimme also said the organization has calculated that like recent years, the single largest current account deficit would be reported by the US at $420 billion.
Germany has bene repeatedly criticized of allegedly contributing to global current imbalances because of its growth model completely focused on exports by U.S. President Donald Trump and the Washington-based International Monetary Fund.
Economic stability in the world is threatened by permanent surpluses that are more than 6 per cent of total GDP of an economy because such surpluses also means that similar corresponding deficits have happened in trading partners’ economies which creates international liabilities in other countries, the IMF has argued.
German policy makers were recently urged to take measures that can put an end to such “excessive surpluses” by the IMF chief economist Maurice Obstfeld at an unusual public intervention.
“Sustained high current account surpluses can become problematic when international claims cannot be met, for example when foreigners are no longer capable of servicing their borrowing costs,” Grimme said.
(Adapted from Xinhuanet.com)