Germany should take advantage of record-low borrowing costs and hike public and private investment in infrastructure, a step that would also help reduce the country’s large current account surplus, the International Monetary Fund (IMF) said yesterday.

“Growth this year is expected to remain moderate as strong domestic demand buoyed by favourable fiscal and monetary conditions is offsetting weak external demand,” the IMF said in its latest economic assessment on Europe’s biggest economy.

In its key policy recommendations for Berlin, the IMF said Germany should step up public and private investment to meet infrastructure needs.

Berlin should also accelerate structural reforms to boost the economy’s growth potential

Berlin should also accelerate structural reforms to boost the economy’s growth potential by broadening the labour market participation of refugees, women, and older workers, it added.

The IMF also called on Germany to remove impediments to housing supply expansion to help relieve the pressure on the housing market, and also to implement measures to strengthen the oversight role of banks’ supervisory boards.

The IMF said it expected Germany’s current account surplus to stay near record levels this year. In mid-April, the Fund said it expected the German economy to grow by 1.5 per cent in 2016 and 1.6 per cent in 2017.

Last month, the German government stuck to its economic growth forecast of 1.7 per cent for this year, despite a slowdown in emerging markets, as strong domestic demand is replacing exports as the main pillar of Europe’s largest economy.