Germany’s current account just hit a record high – but not everybody is celebrating
Germany recorded its largest ever monthly current account surplus in March, as exports of Germany goods held steady in the face of global turmoil and imports dipped.
Mo money …
Firms sold a total of €107bn (£85bn) during the month – down just 0.5 per cent on March last year. Imports came in at €81bn, down four per cent.
Combined, this meant that "the foreign trade balance showed a record surplus of €26bn in March 2016," Destatis, the official German statistics agency, said.
After factoring in money from investments and other sources of income arriving in and leaving the country, Germany's current account surplus came in at a massive €30bn.
Germany's stellar surplus will be seen as a sign of buoyant demand for competitive German products. It stands in contrast to Britain's current account deficit which came in at a whopping seven per cent of GDP in the final quarter of last year – its largest even on record.
… Mo problems
However, it appears you can have too much of a good thing.
Current account deficits or surpluses indicate economic imbalances one way or another.
EU rules limit member states from running surpluses of more than six per cent of GDP. Germany's is set to be 8.5 per cent this year, according to the European Commission, raising fears across the continent that Germany is sucking in cash from the rest of the single currency bloc.
Read more: All you need to know about the UK's current account
Yesterday, the International Monetary Fund called on Germany to create a more "dynamic" economy to help "benefit the still fragile economic recovery in the Eurozone." It believes the large current account surplus is a symptom of a lack of creativity from policymakers and a reluctance to invest in much-needed infrastructure projects.
Growth this year is expected to remain moderate as strong domestic demand buoyed by favourable fiscal and monetary conditions is offsetting weak external demand. Medium-term potential growth is projected to decline as the population ages.
This has contributed to the large and persistent current account surplus by pushing up savings and holding back domestic investment.
More progress on structural reforms would revitalise potential growth and enhance the authorities’ leadership at the European level in this area.
– International Monetary Fund