June 12, 2018 / 9:06 AM / 6 months ago

German upswing remains robust despite U.S. tariff threat: OECD

Organisation for Economic Co-operation and Development (OECD) Secretary-General Angel Gurria attends a news conference to present the economic report on Germany in Berlin, Germany, June 12, 2018. REUTERS/Michele Tantussi

BERLIN (Reuters) - Germany’s economic upswing remains strong despite the threat of protectionist U.S. trade policies and the government should use its budget surplus to increase investment to help to reduce its large current account surplus, the OECD said on Tuesday.

“Economic growth is robust and prosperity is high,” the Organisation for Economic Co-operation and Development said in its country report on Germany. It expects Europe’s largest economy to grow by 2.1 percent this year and next.

The OECD predicted that German exports would grow by 4.5 percent in 2018 and 2019 despite the threat of rising trade barriers and U.S. President Donald Trump’s tariffs and sanctions policies.

“The current account surplus remains large,” the OECD said, echoing similar criticism from the European Commission and the International Monetary Fund.

The German government should implement structural reforms to boost long-term, socially inclusive and environmentally friendly growth, the OECD said. Such reforms should include public investment and a reduction in incentives for household saving, it said, which could boost household and domestic spending.

The OECD welcomed relatively high wage agreements recently settled in Germany. “Wages are growing moderately,” it said, adding that the latest deals point to some acceleration in wage growth.

“However, rising inflation, primarily due to higher oil prices, is eroding real wage gains to some extent,” the OECD said.

Reporting by Michael Nienaber; Editing by Madeline Chambers and David Goodman

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