(Adds Economy Ministry reaction)
BERLIN, Jan 30 (Reuters) - Germany's current account surplus is expected to have hit a new record of $297 billion in 2016, overtaking that of China again to become the world's largest, the Munich-based Ifo economic institute said on Monday.
This would be equivalent to 8.6 percent of total output, which means it would once again breach the European Commission's recommended upper threshold of 6 percent. In 2015 the current account surplus stood at $271 billion.
The European Commission and the United States have urged Germany to lift domestic demand and imports to help reduce global economic imbalances and fuel global growth, including within the euro zone.
Germany rejects such criticism, saying it already lifted domestic demand by introducing a national minimum wage in 2015 and agreeing on a strong hike in pension entitlements in 2016. In addition, the government has increased state spending on roads, digital infrastructure and asylum seekers while sticking to its goal of keeping a balanced budget.
Asked about Ifo's estimate, a spokeswoman for the economy ministry said the government views the surplus as high but the imbalance was not excessive.
"The federal government shares the view of the European Commission that the German current account surplus has to be assessed as high - but it doesn't represent an excessive imbalance," spokeswoman Tanja Alemany Sanchez de Leon said.
She added that Germany's current account surplus with other euro zone countries halved to some 2 percent of gross domestic product in 2015 from roughly 4 percent in 2007.
"That shows there is a reduction of trade imbalances within the euro zone," the spokeswoman said, adding that 44 percent of Germany's current account surplus was due to business relations with the United States and Britain.
Ifo estimated China's current account surplus at $245 billion last year due to weaker exports. By contrast, the United States is predicted to have the world's largest capital imports, with a deficit of $478 billion for 2016, Ifo said.
Ifo's current account estimate for Germany is lower than a previous estimate of $310 billion.
German Vice Chancellor Sigmar Gabriel said on Thursday that the country's record current account surplus is likely to shrink in 2017 because a slowdown in global trade is dampening export growth while strong domestic demand is pushing up imports.
($1 = 0.9333 euros) (Reporting by Rene Wagner and Gernot Heller; Writing by Joseph Nasr Editing by Jeremy Gaunt.)