Germany and the US: A Tale of AAAs

Germany and the United States are among the few countries left in the world with top sovereign credit ratings. But while the outcome may be the same, a closer look reveals that the two countries’ AAA status is based on very different.

Germany’s economic strength stems from its extraordinary international competitiveness. It is an export-driven economy, while US growth is dependent on domestic demand. Despite slower global growth, Germany’s current account surplus is larger than China’s. The sum of exports and imports of goods and services as a percentage of GDP currently amounts to nearly 90 percent which points to an extremely open economy. The fact that this number is 20 percentage points higher than prior to the financial crisis indicates that the German economy has become even more dependent on international trade in recent years. For the purposes of sovereign risk assessment, this shows the enormous flexibility and competiveness of the German export sector.