Press release No. 399 of 24 August 2021
WIESBADEN – In the first half of 2021, the corona crisis led to a financial deficit (net borrowing) of general government of 80.9 billion euros, according to provisional calculations of the Federal Statistical Office (Destatis). When measured as a percentage of gross domestic product (GDP) at current prices, the deficit ratio was 4.7% in the first six months of 2021.
"The measures taken to contain the corona pandemic continue to place a heavy burden on government finance. They resulted in the second highest deficit in the first half of any year since German reunification in 1991", said Stefan Hauf, Head of Division "National Income, Sector Accounts, Employment" at the Federal Statistical Office. Hauf continued to explain that a higher deficit was only recorded in the first half of 1995 when the debt of the Treuhand agency was integrated into the general government budget.
The results are based on the definitions of the European System of Accounts (ESA) 2010. They form the basis for monitoring the budget situation in the Member States of the European Union (EU) in accordance with the Stability and Growth Pact (Maastricht criteria).In general, only limited conclusions can be drawn for the annual result from the results for the first six months. At present, this effect is even stronger because of the uncertainties regarding the development of the coronavirus pandemic.
Revenue rose by 3.1%, expenditure by 6.9% compared with the first half of 2020
The financial deficit (net borrowing) of general government is the difference between revenue (798.3 billion euros) and expenditure (879.2 billion euros). Compared with the increase in revenue (+3.1%), there was a substantially higher increase in expenditure (+6.9%), so that the deficit in the first half of 2021 was significantly higher than in the first six months of 2020 (47.8 billion euros).
Central government recorded the highest financial deficit (67.0 billion euros)
All government levels showed a financial deficit in the first half of 2021. At 67.0 billion euros, central government recorded the highest deficit, and it was more than twice as high as in the same period a year earlier (26.9 billion euros). Social security funds showed a deficit of 10.2 billion euros, while state government (3.1 billion euros) and municipalities (0.6 billion euros) recorded comparatively low deficits.
Base effect: year-on-year increase in tax revenue and social contributions
Tax revenue, which accounts for about half of total government revenue, increased by 4.3% in the first six months of 2021, after falling 6.1% in the first half of 2020. However, the tax revenue received by general government in the first half of 2021 was still 2.1% lower than in the first six months of 2019, the pre-crisis year.
The year-on-year increase in current taxes on income, wealth, etc. (+4.5%) was slightly higher in the first half of 2021 than the rise in taxes on production and imports (+4.0%). Social contributions rose by 3.4%. In contrast, there was a decline of government revenue from interest and dividends received (-37.9%), the main reason being that, in contrast to the previous year, the Deutsche Bundesbank did not distribute a profit.
Economic stimulus package contributes considerably to deficit
A major factor contributing to the increase in general government expenditure was the expenditure made on corona-related interim financial help, compensation paid to hospitals, vaccines and protective equipment, as well as short-time working allowance and child bonus. These measures are reflected in the increase in subsidies (+44.4%), intermediate consumption (+6.6%) and social benefits other than social transfers in kind (+6.2%). In contrast, interest payments of general government continued to decline and were down by 10.7%. General government gross capital formation was 2.7% lower than in the first half of 2020.
More information:
The European statistical office Eurostat provides data on European government finance on its website.
Current data on the Federal Government’s economic stimulus packageaimed at overcoming the corona crisis and many other indicators on economic, financial, health and mobility topics are provided through the data portal ”Dashboard Germany" of the Federal Statistical Office.
Methodological notes:
Generally, granting loans or guarantees has no immediate effect on the financial balance (net lending/net borrowing) of general government as defined by the System of Accounts (ESA 2010). In national accounts, they are recorded with an effect on the deficit only if there definitely is a default on a loan or guarantee.
The greater uncertainties caused by the corona crisis may lead to larger revisions than usual in all components of the national accounts.
