Press release No. 075 of 25 February 2022
WIESBADEN – Government finance was characterised by the Covid crisis also in 2021. The financial deficit (net borrowing) of general government in 2021 amounted to 132.5 billion euros, according to provisional calculations of the Federal Statistical Office (Destatis). The deficit thus remains high although it fell by 12.8 billion euros on the previous year. When measured as a percentage of gross domestic product (GDP) at current prices, the deficit ratio was 3.7% in 2021. This means that the 3% reference value of the European Stability and Growth Pact, which is currently suspended, would have been exceeded for the second time in a row.
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).
Revenue rose by 8.9%, expenditure by 7.4% compared with 2020
Government revenue was up 8.9% to 1,705.8 billion euros on 2020, which was a slightly larger increase than that of expenditure (+7.4% to 1,838.2 billion euros). This resulted in a slightly lower financial deficit in 2021.
Central government records financial deficit of 143.4 billion euros
The financial deficit of general government in 2021 was mainly due to the financial deficit of central government, which continued to increase due to the high costs of the Covid pandemic. The central government financial deficit amounted to 143.4 billion euros in 2021, rising by 57.0 billion euros on the previous year. The financial balance (net lending/net borrowing) of state government (5.1 billion euros), local government (1.4 billion euros) and social security funds (4.4 billion euros) was slightly positive in 2021, one of the reasons being high transfers from central government.
Strong increase in tax revenue on 2020
Tax revenue in 2021 rose considerably (+12.9%) year on year. The recovery was mainly due to higher revenue from corporation tax. Large increases were recorded especially for corporation and trade tax revenue (+71.4%, +24.4%). In addition, a base effect caused by the reduced turnover tax rates in the second half of 2020 contributed to the increase in taxes on products. Also, revenue from the new CO2 tax was first received in 2021. The increase in wage tax revenue, however, was reduced by the abolishment of the solidarity surcharge for most persons employed.
Economic stimulus package has upward effect on expenditure
The measures taken to contain the Covid pandemic made a major contribution to rising general government expenditure also in 2021. For example, procuring vaccines and protective equipment, setting up and operating vaccination centres, and carrying out Covid tests led to a further increase in intermediate consumption of 10.8%. The increase in subsidies (+47.3%) reflects not only the Covid-related interim financial help but also the federal subsidy introduced in 2021 and aimed at reducing the EEG surcharge and the support for the purchase of electric cars by means of the innovation premium introduced in 2020. Capital transfers, too, increased considerably (+42.0%), one of the reasons being compensatory payments for nuclear power plant operators, subsidies for investments in energy efficiency and renewable energy sources regarding the construction of buildings, and reconstruction aid for victims of the flood in July.
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 package aimed 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 Covid crisis may lead to larger revisions than usual in all components of the national accounts.
