Huge deficit in the first half of the year
Energy price brakes tear budget holes
08/25/2023 10:38 am
With many billions of euros, Germany supports consumers and the economy with the sharp rise in energy prices. This is clearly noticeable in the budget balance sheet: the deficit in the state treasury grows to 42.1 billion euros in the first half of the year.
Germany’s budget deficit increased significantly in the first half of the year compared to the same period of the previous year. The background to this is the disproportionately high increase in expenditure as a result of the relief packages for energy prices, as stated in the statement from the Federal Statistical Office (DESTATIS). The deficit was 42.1 billion euros and was thus 37.6 billion higher than a year ago. This results in a deficit ratio of 2.1 percent after 0.2 percent in the first half of 2022.
The increase in the deficit resulted from an increase in expenditure of 7.7 percent, which was more than twice as strong as income (3.5 percent). In 2022 as a whole, the deficit ratio was 2.5 percent, with the half-year figure at best providing a trend, but no extrapolation for the year as a whole.
State revenues totaled 917.2 billion euros, compared to expenditure of 959.3 billion euros. As in the same period of the previous year, the federal government accounted for the largest share of the financing deficit in the first half of the year. At 39.2 billion euros, it was 3.0 billion euros higher than a year ago. The federal states (EUR 3.1 billion) and municipalities (EUR 6.8 billion) also contributed to the increase. In the same period of the previous year, they had still achieved financing surpluses of 18.2 and 5.8 billion euros, respectively, due to high transfers from the federal government. In the first half of the year, social security recorded a surplus of EUR 7.0 billion, down EUR 0.7 billion.
Tax revenue will decrease slightly
On the revenue side, tax revenue was down by 0.3 percent. While VAT recorded a slight increase of 0.5 percent, income from real estate transfer tax fell by 33.5 percent as a result of a noticeable reluctance to buy land and real estate. According to DESTATIS, this is likely to be primarily a consequence of increasingly poor financing conditions and rising construction costs.
Income tax receipts fell by 0.8 percent, which is partly due to the increased basic allowance on January 1, 2023 regulated in the Inflation Compensation Act. Social contributions, on the other hand, climbed by 6.5 percent, partly due to the continued robust development of employment subject to social security contributions, the increase in the contribution assessment ceiling and the increase in the contribution rate for unemployment insurance by 0.2 percentage points at the beginning of 2023.
According to the statisticians, the sharp rise in government spending was primarily related to the federal government’s relief packages in response to high inflation and high energy prices. The gas and heat price brake, the electricity price brake and the associated hardship regulations for hospitals and care facilities led to an increase in subsidies of 45.7 percent in the first half of the year. In addition to the reform of the housing benefit and the increase in child benefit, the increase in social benefits and the statutory pension increased by 7.3 percent.
The reform of federal funding for efficient buildings, which came into force at the beginning of 2023, contributed to the increase in investment grants by 32.8 percent. The state’s interest expenditure increased by 38.0 percent.