It is no secret that Germany is running the largest surplus economy in the world. This has attracted huge criticism from other leaders such as US-President Trump. What is angering these nations is that the surplus is projected to increase and to remain the largest in the world this year.
In 2016, Germany had a surplus of $285 billion – compared to China which had a surplus of $190 billion and Japan's surplus at $170. This trend is expected to continue if a recently leaked forecast by Börner Group (BGA) is anything to go by. In the forecast, it is estimated that foreign sales will increase from 1.1% from the previous 12 months to 5% over the course of the year.
Is having a surplus good or bad?
From a theoretical point of view, a surplus is not always a good thing, while neither is having a deficit bad. When a country has surplus savings, they will look to invest in other countries which do not have enough savings. On the other hand, if a country has profitable investments but not enough savings, they will try and attract foreign investment.
Why then is Germany's surplus being attacked?
While theoretically there should be a balance in trade between a country having a surplus and one with a deficit, this is not the case when it comes to Germany. After they were defeated in the World War, they invested heavily in high class manufacturing industries. This resulted in a situation, where it shaped itself as an exporting powerhouse, while its domestic industries such as construction or retailing remained rather weak. This means Germany heavily relies in exporting with under consumption in its domestic market, which means they do not import as much. This is the trade imbalance that is attracting anger from other countries.