Press release No. 337 of 25 August 2023
WIESBADEN – The financial deficit (net borrowing) of general government amounted to 42.1 billion euros in the first half of 2023, according to provisional calculations of the Federal Statistical Office (Destatis). The general government deficit was therefore 37.6 billion euros higher than in the first half of 2022. When measured as a percentage of gross domestic product (GDP) at current prices, the deficit ratio was 2.1% in the first six months of 2023.
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) and must not be confused with the financial balance of the overall public budget as defined for finance statistics. Only limited conclusions can be drawn for the annual result from the results for the first six months.
Revenue rose by 3.5%, expenditure by 7.7% compared with the first half of 2022
The financial deficit (net borrowing) of general government is the difference between revenue (917.2 billion euros) and expenditure (959.3 billion euros). The year-on-year increase in the financial deficit seen in the first half of 2023 is mainly due to a sharp increase in expenditure (+7.7%) and a comparatively small increase in revenue (+3.5%).
Central government recorded financial deficit of 39.2 billion euros
Central government accounted for the largest share of the financial deficit of general government in the first half of 2023, as in the same period a year earlier. At 39.2 billion euros, the financial deficit of central government was up 3.0 billion euros compared with the first half of 2022. The deficits of state government (3.1 billion euros) and local government (6.8 billion euros) also contributed to the increase in general government financial deficit. In the first six months of 2022, state and local government achieved financial surpluses (18.2 and 5.8 billion euros, respectively), which was partly due to high transfer payments from central government. Social security funds recorded a surplus of 7.0 billion euros in the first half of 2023, 0.7 billion euros less than in the first six months of 2022.
Tax revenue down, social contributions up
Tax revenue fell by a total of 0.3% in the first half of 2023 from the same period of the previous year. A slight increase of 0.5% was recorded for value-added tax, whereas the revenue from tax on acquisition of real estate dropped by 33.5% as there was a notable reluctance to purchase land and buildings. Worsening financing conditions and rising construction costs are likely to be the main reasons for this development.
Income tax revenue in the first half of 2023 was down 0.8% on the same period a year earlier, which was partly due to the increase in the basic tax allowance as of 1 January 2023 laid down in the Inflation Compensation Act. By contrast, social contributions rose by 6.5%, with the main causes being the ongoing robust development of employment subject to social insurance contributions, the raised contribution assessment ceiling and the 0.2 percentage point increase in the contribution rate to unemployment insurance as of the beginning of 2023.
Brakes on energy prices drive expenditure
The sharp increase in government expenditure is related with the Federal Government’s relief packages adopted as a reaction to high inflation and energy prices. The brakes on gas, heating and electricity prices and the related hardship clauses applying to hospitals and care facilities caused a sharp rise in subsidies by 45.7% in the first half of 2023 year on year. Apart from the housing allowance reform and a higher children's allowance, the increase in social benefits other than social transfers in kind by 7.3% was mainly due to additional expenditure on citizen's benefits and statutory pensions. The reform of federal funding for energy-efficient buildings, which entered into force at the beginning of 2023, contributed to the rise in investment grants by 32.8%. Interest payments of general government were up 38.0% in the first six months of 2023 from the first half of 2022.
Methodological notes:
Deviations between the financial balance (net lending/net borrowing) of general government as defined in national accounts and the financial balance of the overall public budget as defined for finance statistics are due to methodological differences. Detailed information on the deficit calculation (only in German) is offered on the Federal Statistical Office’s website.
