BERLIN (Reuters) - Germany will run the world’s largest current account surplus in 2019 for the fourth consecutive year, the Ifo economic institute said on Friday, likely putting further pressure on Berlin to help reduce global imbalances and stimulate domestic demand.
This year’s surplus in the current account — which measures the flow of goods, services and investments — is seen at $276 billion, Ifo economist Christian Grimme told Reuters.
He added that Japan’s surplus is projected to come in at $188 billion, followed by China with $182 billion.
In contrast, the United States is expected to post a current account deficit of $480 billion, the world’s largest, despite President Donald Trump’s trade war with China and additional tariffs imposed on products imposed on Chinese products.
Germany’s current account surplus can mainly be attributed to the fact that far more German products and services are sold overseas than imported to Europe’s largest economy.
The trade imbalances have stirred the wrath of Trump, who has threatened to impose additional tariffs on German carmakers. The European Union’s executive body and the International Monetary Fund have also criticized Germany’s surplus.
The European Commission considers a current account surplus of 6% as sustainable over the long-term when measured by the size of a country’s economy.
Germany has come closer to that threshold. While the country reached a record high of 8.5% in 2015, Ifo is now projecting 7.1% this year.
Gita Gopinath, chief economist for the International Monetary Fund, said the global lender had long pressed Germany to boost spending and reduce its current account surplus, and there had been some movement of late.
“There has certainly been a shift towards doing more fiscal spending to raise potential output,” Gopinath told an event at the Center for Strategic and International Studies think tank in Washington. “The question is whether that’s enough.”
Gopinath said it made sense for Germany to act now and take advantage of low interest rates.
“If you are a country that needs to undertake spending investment in your infrastructure and today, you’re able to borrow at very very low rates, just from a pure cost-benefit analysis, it would make sense to do it now,” she said.
Reporting by Rene Wagner in Berlin; Additional reporting by Andrea Shalal in Washington; Writing by Thomas Seythal and Andrea Shalal; Editing by Paul Carrel and Tom Brown