Germany's current account surplus has fallen again
Germany's current account surplus has fallen for the third consecutive year. It fell last year to 7.4 percent of annual economic output, after 7.9 percent in 2017, 8.5 percent in 2016 and a peak of 8.9 percent in 2015. The EU considers a maximum of six percent to be sustainable in the long term. The decline is attributable to two factors: For example, the surplus in goods exports to Europe fell because imports rose more strongly. In addition, annual economic output, including inflation, rose quite strongly by 3.4 percent.
Nevertheless, Germany should again become the country with the largest current account surplus in 2018, as in the previous two years. At 294 billion US dollars (249 billion euros), the German value is ahead of Japan, which has a surplus of 173 billion US dollars, equivalent to 3.5 percent of its annual economic output. Russia recently ranked third with around 116 billion US dollars (7.0 percent of its annual economic output). On the other hand, the USA is again likely to be the country with the largest current account deficit with about 455 billion US dollars, which corresponds to only 2.3 percent of its annual economic output.
Despite the trade disputes, the US current account deficit increased by a further USD 5 billion. Trade in goods had a bigger deficit, but surpluses increased in sales of services and income from foreign asssets. Exports to China fell significantly, while imports from China continued to grow strongly.
In 2018, China is no longer among the top three countries with the highest surpluses. This is due to a significantly lower surplus of goods, which, however, resulted less from trade disputes than from increased imports of machinery, which can be seen in connection with the "Made in China 2025" promotional programme extended at the beginning of 2018.
Russia is for the first time among the three countries with the highest surplus. The unusually large increase in the surplus last year is due to trade in goods. While exports continued to grow, not least due to rising oil and gas prices, imports stagnated. This is likely to be a consequence of various policies aimed at reducing import dependency in the long term.
By definition, current account surpluses are associated with high net capital exports. Germany is thus building up more financial receivables from abroad than foreign receivables from Germany. In addition to the sale of goods or services to foreign countries, income from foreign assets also increases the current account surplus, as this increases payment claims against foreign countries. Permanently high current account surpluses can become problematic if the receivables cannot be redeemed, for example if the foreign country is no longer able to service the interest burden.
