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Eurozone current account surplus has continued to expand, on Germany’s major contribution to the region, in terms of surpluses, underscoring inherent strength in the euro beyond the monetary policy-induced moves.
Last year, the zone’s current account surplus jumped to 3.2 pct of GDP from 2.5 pct year in 2014 and 2.1 pct in 2013. Much of this is attributable to Germany whose sizeable surpluses have emerged as a sticking point, DBS reported.
Running the widest positive balance amongst member countries, the surplus has stayed above 6 pct of GDP since 2012 and touched a record high of 8.3 pct of GDP last year. The latest reading exceeds the European Commission’s (EC) recommended 6 pct of GDP threshold by a significant margin and has been flagged by EC in its Macroeconomic imbalances procedure (MIP) report since 2012.
Apart from Germany, other core economies like Spain and Italy, have also posted wider surpluses but to a lesser extent. Spain’s balance widened to 1.4 pct of GDP from 1 pct year before and Italy’s up to 2.2 pct compared to 1.8 pct in 2014.
"Routinely large surpluses are seen as an indication of lack of domestic demand, particularly weak investment spending," DBS commented in a recent research note.
Unless Germany and other Eurozone members take concerted efforts to channelize significant savings within the domestic sector, the balance will remain biased towards strong current account surpluses.
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