Press release No. 359 of 25 August 2022
WIESBADEN – The financial deficit (net borrowing) of general government amounted to 13.0 billion euros in the first half of 2022, according to provisional calculations of the Federal Statistical Office (Destatis). The general government deficit thus was markedly lower than in the first half of 2021 (75.6 billion euros). When measured as a percentage of gross domestic product (GDP) at current prices, the deficit ratio was 0.7% in the first six months of 2022. The deficit ratio was 4.3% in the first half of 2021.
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). However, only limited conclusions can be drawn for the annual result from the results for the first six months.
Revenue rose by 7.9%, expenditure by 0.2% compared with the first half of 2021
The financial deficit (net borrowing) of general government is the difference between revenue (879.4 billion euros) and expenditure (892.4 billion euros). The decrease in the financial deficit in the first half of 2022 compared with the first half of 2021 (75.6 billion euros) is due especially to a sharp 7.9% increase in revenue and just a slight increase in expenditure of 0.2%.
Central government records financial deficit of 42.8 billion euros
The main reason for the financial deficit of general government in the first half of 2022 was the financial deficit of central government (42.8 billion euros), even though the latter was lower than in the first half of 2021 (60.7 billion euros). The financial balances (net lending/net borrowing) of state government (16.6 billion euros), local government (5.7 billion euros) and social security funds (7.4 billion euros) were positive in the first six months of 2022.
Strong increase in tax revenue on 2021
On the revenue side, tax revenue in the first half of 2022 was by 11.6% higher year on year, thus clearly exceeding the level recorded before the Covid-19 crisis in the first half of 2019. Taxes to be paid by enterprises accounted for a large part of the increase: sharp increases were recorded for revenue from trade tax (+27.7%), assessed income tax (+24.8%) and corporation tax (+19.4%). Also, revenue from turnover tax and turnover tax on imports was up (+15.5%), one of the reasons being inflation. The generally positive development in the labour market – less short-time work and an increasing number of employees subject to social insurance contributions – was also reflected by a 7.0% increase in wage tax revenue.
Subsidies decreased due to the end of Covid-19 measures
The small increase in expenditure had two reasons. The first is the sharp decline in subsidies. They fell by 50.1% in the first half of 2022 compared with the same period a year earlier. This was mainly due to the end of various Covid-19 measures. For example, much less Covid-related interim financial help was sought and other Covid-related measures such as government reimbursements of social security contributions for short-time work decreased, too. Also, most of the relief measures adopted because of the impact of the war in Ukraine will not take effect until the second half of 2022.
The second reason is that the development in the labour market led to a decrease in expenditure on social benefits other than social transfers in kind (-3.0% year on year), which was mainly due to lower expenditure on short-time working allowance and unemployment benefit I I and II. One of the factors leading to this development is a base effect caused by social benefits other than social transfers in kind, which strongly increased since 2019 due to the impact of the Covid-19 crisis. In the first half of 2022, they were still above the level recorded in the first half of 2019, that is, before the Covid-19 crisis.
Marked increases were recorded for interest payments (+14.5%) and for international cooperation payments (+48.3%), particularly due to the financial support for Ukraine.
More information:
The European statistical office Eurostat provides data on European government finance on its website.
Methodological notes:
The greater uncertainties caused by the Covid crisis and the war in Ukraine may lead to larger revisions than usual in all components of the national accounts.
