Germany: Only modest decline in the current account surplus

- "The German economy is currently benefiting from extremely dynamic world trade. In Q2 real goods exports rose by more than 20% and Germany’s macroeconomic growth hit a new record of 2.2% compared with the pre-year quarter."
- "German export momentum is, however, likely to ease significantly in H2 2010 and above all in 2011, as the international inventory cycle as well as the catch-up effects from investments postponed in 2009 will slowly tail off and also the underlying cyclical performance in major client countries will probably recede."
- "In addition to the impact of this cyclical development the highly export-dependent German economy is also being hit by the adjust-ments in Europe’s crisis-ridden countries. The correction of the excesses in the real estate markets and the partially drastic consolidation programmes will severely dampen the import demand of these countries over the longer term."
- "The strain on the German current account is, however, likely to remain within bounds, as the importance of the problem countries for the German economy is relatively low, other major markets are stable, and any adverse effect s may be offset by demand from emerging markets, especially in Asia."
- "Nevertheless, in the medium term Germany’s large current account surplus needs to be reduced, as the origins of the crisis lay in undesirable structural developments on both sides, that is not only in current account deficits, but also in the reciprocal surpluses. All in all, we expect that the German current account surplus will first widen from 5.0% to 5 ½% of GDP this year, before narrowing slowly, however. In 2012 it could then stand at 4 ½%."

DeutscheBank Current Issues 20100906

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