2013 German current account surplus a world record

The German current account surplus for 2013, likely to have exceeded €200 billion ($270 billion) in 2013, was a world record.

The country exported a record amount of capital, according to estimates by researchers at the Ifo Institute.

Ifo added that Germany’s current account balance also grew in relation to nominal GDP (gross domestic product), which currently stands at 7.3%. Nearly all of it due to trade in goods.

Germany’s current account surplus expanded dramatically with non Eurozone countries, while shrinking with nations inside the euro area. A small surplus is expected with China, for the first time since reunification.

A current account surplus record with the United States is also expected for 2013.

German current account greater than China’s

Germany’s current account surplus in 2013 has exceeded China’s likely $195 billion. Germany and China are followed by Saudi Arabia as the three countries with the largest current account surpluses.

A current account surplus measures the share of a country’s savings that is not invested at home. Germany in 2013 was the world’s largest capital exporter, placing a large share of its savings overseas. The country invested in financial and tangible assets abroad on the one hand, and directly or indirectly took part in fiscal bailout credit to secure private capital flows.

Many trade partners have lost competitiveness as a result of large-scale capital imports and inflationary credit bubbles, says the Ifo Institute, which is based in Munich, Germany.

Germany’s low inflation rate helped improve competitiveness

Germany’s competitiveness in comparison to these countries has improved, mainly because of low inflation. The euro is too high for the southern Eurozone nations and too low for Germany.

“Direct financial assistance was not provided to the same extent as in previous years in 2013, but thanks to the highly lethargic nature of the current account balance, it will take several years for changes in autonomous capital flows to be reflected in a change in the flow of goods and services. The high current account surplus should therefore mainly be due to the initially private and subsequently primarily publicly-driven capital exports of previous years, and to the corresponding change in relative prices in the euro area.” says the ifo Institute.

Ifo researchers are sure Germany will have another current account surplus in 2014.

Price competitiveness will probably deteriorate this year, especially compared to the other Eurozone countries, because the lasting crisis has kept prices and wages down in the euro area.

German exports, nevertheless, are expected to remain strong, because of continued bail-out activities of the European Union member states and the European Central Bank, as well as growing global demand for goods.

The Ifo Institute predicts that the German current account surplus for 2014 will be 7.4% of GDP.

In November, 2013, the US Treasury criticized Germany for for its export-led growth, saying it was undermining the other economies in Europe, and to a certain extent those of other countries too.