* Institute expects c/a surplus of $285 billion in 2017
* German surplus much larger that those of China, Japan
* German c/a surplus to shrink to 7.9 pct of GDP this year
* Economy Ministry points to halved surplus with euro zone (Adds reactions from European Commission and Economy Ministry)
BERLIN, Sept 7 (Reuters) - Germany's current account surplus is likely to remain the world's largest this year despite shrinking somewhat mainly due to higher costs for oil and natural gas imports, the Munich-based Ifo economic institute said on Thursday.
The International Monetary Fund (IMF) and the European Commission have for years urged Berlin to lift domestic demand and imports to help reduce global economic imbalances and fuel global growth, including within the euro zone.
U.S. President Donald Trump has also criticized Germany for doing too little to reduce its trade surplus with the United States.
Chancellor Angela Merkel and other officials have pushed back, saying Berlin's economic and fiscal policies have already turned private consumption and state spending into the main growth drivers of Europe's biggest economy.
Merkel has said Berlin has only a limited influence on other important factors such as the euro exchange rate and energy prices.
Ifo said it estimated that the surplus - which measures the flow of goods, services and investments - would remain the world's largest in 2017 at $285 billion, followed by China with roughly $190 billion and Japan with $170 billion.
"Germany's overall surplus is mainly caused by trade flows," Ifo said in its analysis, adding that stronger demand from other euro zone countries, the rest of the EU and the United States had boosted exports in the first half of the year.
The surplus is expected to shrink to 7.9 percent of total output in 2017 from 8.3 percent last year. "This is mainly due to energy prices," Ifo said. Higher costs for oil and natural gas are pushing up imports which has a dampening effect on the trade surplus.
Still, Ifo's estimates mean Berlin would once again breach the European Commission's recommended upper threshold of 6 percent this year.
SURPLUS WITH EU TUMBLES
An Economy Ministry spokesman said Germany's current account surplus with other euro zone countries had nearly halved in the past 10 years, however, to some 2 percent of gross domestic product in 2016 from more than 4 percent in 2007.
Berlin has taken numerous measures to strengthen domestic demand and rein in the surplus, he said. He pointed to higher public investment, the introduction of a national minimum wage in 2015 and its increase two years later which both contributed to rising real wages.
"The Economy Ministry will continue to push for an increase in public investment," the spokesman added.
A spokesman for the European Commission in Berlin declined to comment on the latest figures, adding that Brussels wanted to avoid the impression of meddling in the German election campaign less than three weeks before the Sept. 24 vote.
In May, the European Commission said the surplus reflected "excess savings and subdued investment" in both the private and public sectors.
The Commission called on Berlin to increase domestic demand by accelerating public investment at all levels of government - especially in education, research and innovation - and tackling capacity and planning constraints for infrastructure projects. (Reporting by Rene Wagner and Michael Nienaber; Editing by Thomas Escritt)