Eurozone current account surplus widens in 3Q16, Brexit developments to have a major impact

The Eurozone current account surplus continues to widen, with a stable external sector providing inherent support to the euro. The zone’s current account surplus jumped to 3.5 percent of GDP in the third-quarter of 2016, from 3.0 percent average in 2015 and a small negative in 2008-09, reported DBS Group Research.

Much of this has been on account of Germany. The latter’s surplus widened to 8.8 percent in the third-quarter of 2016, from 8.4 percent in 2015 and sub-5 percent in wake of the financial crisis. While it is a positive for macro stability, the sharp increase is not without risks, they added.

The DBS in its research note mentioned that the Germany surpluses exceed the European Commission’s (EC) recommended threshold by a significant margin and have been repeatedly flagged in its annual imbalance reports. External balances of other member countries have also been on mind, though by a smaller measure and hovering below 2 percent of GDP.

Encouragingly much of this surplus is stemming from a wide trade balance. Exports growth gained ground in 2013-15 but contracted -0.1 percent y/y in January-November, 2016. Import growth also followed the same trend but fell a sharper 2.2 percent in the first eleven months of 2016.