IFO: Germany’s capital exports hit new high

Germany achieved a new world record in capital exports in 2014, according to calculations by the Ifo Institute. Its current account surplus increased by around 30 bln euros to almost 220 bln, which corresponds to 7.5% of economic output. This development was driven by the trade balance.

Other items of the current accounts (like services and income from interest) had a slightly negative impact overall, with the low interest rate policy pursued by the European Central Bank sharply curbing Germany’s foreign revenues.
Germany’s net capital exports, worth around $285 bln, were once again far higher than those of China, which posted a current account surplus of around $150 bln last year. In third place, and lagging some way behind the two leaders, was the oil-producer Saudi Arabia. This makes Germany the country with the second largest net foreign assets in the world after China.
The largest share of Germany’s annual surplus was generated outside the euro area and amounted to 170 bln euros. After turning positive in 2013 for the first time since German reunification, the current account balance with China increased in 2014 to around 4.5 bln euros.
Germany’s current account surplus is partly due to the favourable economic situation in key trading partner countries like the USA and Great Britain. Germany also had to pay considerably less for oil imports due to declining prices towards the end of 2014.
The situation looks set to remain positive in 2015. In view of low oil prices and the continued economic upswing in key trading partner countries outside the euro area, Germany’s current account surplus looks set to rise to around 240 bln euros. The weak euro is also supporting exports, with net capital exports expected to increase to 8% of annual economic output.
By definition current account surpluses measure the share of a country’s savings that is not invested domestically. The sum of almost 220 bln euros that was invested abroad in 2014 corresponds to approximately every 13th euro that was saved domestically in Germany last year.