Brussels – As in the year before, also in 2017 Germany will be the country with the world’s largest current account surplus, as calculated by the ifo Institute. At an estimated US$285 billion (€257 billion), the German figure will be more than that of China, which is expected to reach a surplus of about US$190 billion this year. Japan ranks third at around US$170 billion.
The German current account surplus is mainly attributable to trade in goods; in the first half of the year alone, a surplus of €134 billion was achieved here. The main driver was demand from the other countries of the euro area, the other EU countries and from the United States. Also contributing to the surplus were yields from the assets invested outside Germany and earned income by Germans abroad totalling some €20 billion. Transfer payments abroad, for example to international organisations, reduced the surplus by €27 billion.
However, in the current year Germany’s surplus will fall to 7.9 percent of annual economic output, after 8.3 percent in 2016. This is mainly due to energy prices. The prices for imported oil and natural gas are expected to be higher than in the previous year despite the appreciation of the euro, which will increase the nominal import of goods and will reduce the surplus. From 2013 to 2016, in contrast, the opposite effect was observed: a sharp fall in oil prices that increased the current account surplus by 1.4 percentage points during this period. The EU considers a maximum of six percent as sustainable in the long term.
The Chinese current account surplus is also due to goods trade. By June, goods worth €200 billion net were exported. This means that the Chinese goods surplus is significantly higher than that of Germany. However, in the first half of 2017, China was a demander of services from abroad worth €125 billion.
By definition, capital exports are the portion of the savings of a country that is not invested domestically. High net capital exports mean that Germany is building up more financial claims against foreign countries than foreign countries are against Germany. A current account surplus is always accompanied by net capital exports, since the sale of goods or services to foreign countries must be accompanied by higher financial claims against foreign countries. Income from foreign assets also increases the current account surplus, since this increases the payment claims from foreign countries.