Germany is expected to run the world’s biggest surplus in current accounts during 2019, which is a trend that will enter its fourth consecutive year. The detail was announced by the Ifo Institute for Economic research. This news is projected to put additional pressure on the German government to reduce worldwide imbalances, while stimulating domestic demand.
The surplus in current accounts for 2019, which is a key measure for the movement of investments, goods, and services is being viewed at USD 276 billion. In comparison the current account surplus in Japan is expected to reach only USD 188 billion, followed by China with USD 182 billion.
On the other hand, the United States is projected to post a deficit of USD 480 billion, which is the largest deficit in the world, in spite of the trade war initiated between China and the Trump administration in the U.S., which had put additional tariffs on Chinese products.
IMP Pushes Germany to Increase Spending
The current account surplus in Germany can be attributed to the fact that Germany exports of goods and services are much higher than its imports. The imbalance in trade figures has been criticized by U.S. president Trump who has threatened to increase tariffs on German automobile manufacturers. The executive body of the European Union and the International Monetary Fund has also been critical of the excess surplus of Germany.
Chief Economist of the International Monetary Fund, Gita Gopinath has stated that the global lender was pushing Germany to increase its spending, while reducing its current account surplus, which has resulted in limited action so far. In addition, the IMF is also hoping that Germany would become active in taking advantage of lower interest rates:
“There has certainly been a shift towards doing more fiscal spending to raise potential output. The question is whether that’s enough. 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.”