By Andrea Thomas 

BERLIN -- Germany's current account surplus will fall over the next months due to strong domestic demand, said the finance ministry, which also responded to international critics by warning that a change to its business model could hurt other countries.

"Germany isn't only the world's third largest exporter but also the third largest importer," the finance ministry said Thursday in its latest monthly report. "Particularly those partner countries' economies are profiting from German exports that are well integrated into the international supply chain, that show a strong industrial basis or that offer a good business climate."

The ministry added, "Any dismantling of well-established market-driven trade structures would be at the expense of countries' prosperity."

The nation's current-account surplus -- a broad measure of its foreign trade and investment balance--will fall below 8% of gross domestic product by 2018, from 8.3% in 2016 and 8.6% in 2015, the ministry forecast. It expects higher domestic demand, oil prices and interest rates to help bring the surplus down.

Germany has been under fire for its huge current account and trade surpluses for years, but the new U.S. administration under President Donald Trump has recently stepped up criticism, accusing Europe's largest economy along with China of unfairly benefiting from their weak currencies at America's expense.

The U.S. stood by its criticism during last week's meeting of Group of 20 finance officials in Germany, where it rebuffed a concerted push by world finance chiefs on Saturday to disavow protectionism and instead promoted the need for "free and fair trade."

But in its report, the German government said its market rules-based economy doesn't leave room for unfair trade policies and government interventions wouldn't help bring the surplus down markedly.

"Germany's current account balance is a result of many factors...mainly a result of a pronounced competitive German economy," said the finance ministry.

"The current account level doesn't get controlled by the government; there would in any case be only very limited scope for economic policy tools."

Still, the European Commission, the European Union's executive arm, has also urged Berlin to curb these surpluses by reforming its cosseted services sector and investing more in national infrastructure.

The finance ministry, however, said such calls deflect from the real global challenges.

"Higher government spending in Germany can't solve structural problems in other economies," the finance ministry warned.

It said an expected "normalization" of the eurozone's ultralow interest rate policy, over which it has no influence, can help to reduce the current-account deficit.

Germany's aging society will also help to lower the rate in the medium term, the report said.

"With a progressing aging of the society, savings held abroad will be reduced to finance consumption in Germany," the ministry said. "As a result, the current account surplus should fall again and could even turn into a deficit."

Earlier this week, Germany's Deutsche Bundesbank central bank and the government's council of economic advisers made similar comments, arguing that the nation's current-account surplus was likely to fall sharply this year and warned it shouldn't be curbed using political tools.

Write to Andrea Thomas at andrea.thomas@wsj.com

(END) Dow Jones Newswires

March 22, 2017 19:14 ET (23:14 GMT)

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