Germany leads Japan with the world's largest current account surplus in 2018 – Ifo

BERLIN (Reuters) – Germany's current account surplus has fallen, but remained by far the world's largest in the last year due to strong exports, according to Ifo data that is likely reiterate the criticisms of Chancellor Angela Merkel's fiscal policy.

The International Monetary Fund and the European Commission have been asking Germany for years to do more to increase domestic demand in order to boost imports, stimulate growth elsewhere and reduce global economic imbalances. Since taking office, US President Donald Trump has also criticized the strength of German exports.

Germany's current account surplus, which measures the flow of goods, services and investment, was the largest in the world for the third consecutive year in 2018, at $ 294 billion, followed by Japan with 173 billion, according to Ifo figures. Russia comes in third with a surplus of 116 billion dollars.

Germany's current account surplus, measured in relation to economic output, declined for the third year in a row, falling to 7.4% in 2018 from 7.9% the previous year, according to figures from Ifo.

Since 2011, Germany's current account balance has consistently exceeded the indicative threshold of 6% of Gross Domestic Product set by the European Commission, and the surplus reached a record 8.9% in 2015.

The European Commission has officially identified a macroeconomic imbalance in Germany for the first time in 2014 and has confirmed this criticism every year since.

In its recommendations, the Commission said Germany should use its budget surplus to boost public investment and create favorable conditions for stronger growth in real wages. The IMF made similar recommendations.

The representatives of the German Government have repeatedly stated that Berlin's fiscal and economic policies were not primarily aimed at influencing the current account balance.

According to them, the trade surplus is the result of decisions made by companies and consumers around the world in terms of supply and demand and is also influenced by other factors, such as prices oil and exchange rates, which are hard to influence.

Nevertheless, the government has decided to spend a large portion of its budget surplus over the next three years to increase child care benefits, reduce taxes and reduce contributions to the public health system, measures that should support household expenditure.