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Opinion: Is Germany’s Current Account Surplus Bad for the World Economy?

EconPol Opinion
| News

The lead story in the Economist earlier this month, “Why the German current-account surplus is bad for the world economy”, starts from the assumption that the rest of the world would benefit if Germany were to spend more. But this holds true only in a world that is constrained by demand, which is less and less the case. The global output gap has already fallen below 0.5% (of potential output) and is projected to disappear within a year or two. Read here why, under these conditions, the German current account surplus, which amounts to 0.33% of global output, cannot do a lot of damage to the global economy.