Press Government deficit dropped slightly to 87.4 billion euros in 2023

Deficit ratio at 2.1% of gross domestic product

Press release No. 067 of 23 February 2024

WIESBADEN – The financial deficit (net borrowing) of general government amounted to 87.4 billion euros in 2023 according to provisional calculations of the Federal Statistical Office (Destatis). The deficit therefore remained high but was down 9.5 billion euros from the previous year because the 4.4% increase in general government revenue (to 1901.8 billion euros) exceeded the 3.7% increase in government expenditure (to 1989.2 billion euros). Measured as a percentage of gross domestic product (GDP) at current prices, the deficit ratio was 2.1% in 2023. The deficit ratio has therefore been revised upwards by 0.1 percentage points compared with the first provisional calculation of 15 January 2024. This means that the 3% reference value of the European Stability and Growth Pact, which remained suspended in 2023, would have been met.

Financial deficit of central government reduced sharply

As in the previous year, the financial deficit of general government was mainly due to the financial deficit of central government (79.0 billion euros) in 2023. There was a sharp reduction by 45.3 billion euros compared with 2022 because measures ended which had been taken in the context of the coronavirus pandemic and the energy crisis. Financial deficits were also recorded for state government (6.4 billion euros) and local government (12.1 billion euros) in 2023, which was in part attributable to falling transfer payments of central government together with ongoing financial burdens resulting from the need to provide for people seeking protection. These two subsectors of general government had generated surpluses in 2022. The financial surplus of the social security funds (10.0 billion euros) increased slightly in 2023.

Positive development of social contributions, slight increase in tax revenue

The altogether moderate rise in revenue seen in 2023 was due, in particular, to the slight increase in tax revenue by 0.7%. This was not only due to the weak overall economic development but also to extensive relief measures aimed at citizens and businesses. Included were relief measures provided for in the Inflation Compensation Act, premiums compensating for inflation, the reduction of the turnover tax rate on gas from 19% to 7%, and the reduced VAT rate on sales of food in the restaurant industry extended until the end of 2023.

As the robust development of employment subject to social insurance continued, social contributions rose 6.6% on a year earlier. There also were substantial increases in property income (+70.4%) received in 2023, which mainly consists of interest and dividends, and in government sales (+10.2%), which include entrance fees of public institutions and municipal charges. Due to the introduction of the Germany ticket on 1 May 2023, most public short-distance passenger transport businesses have belonged to the general government sector from the 2nd quarter of 2023. The revenue from their transport fares increased government sales even more in 2023.

Social benefits other than social transfers in kind and compensation of employees up, subsidies down

Social benefits other than social transfers in kind, in particular, contributed to the rise in government expenditure in 2023; these transfers increased as a result of additional spending on the newly introduced citizen's benefits and on statutory pensions (+6.8%) compared with the previous year. As a consequence of higher wage settlements and tax-free premiums paid to offset inflation, compensation of employees was up 6.3% year on year. Interest payments of general government increased by 36.2% compared with 2022. By contrast, the end of several measures taken in the context of the coronavirus pandemic and the energy crisis reduced subsidy payments by 5.2%, which had risen sharply in recent years. They remained on a high level (66.3 billion euros), however, owing to measures such as the brake on gas and electricity prices applicable until year-end and the related hardship clauses applying to hospitals and care facilities. Current transfers in international cooperation saw a 19.7% decline.

Methodological notes:

When the Germany ticket was introduced on 1 May 2023, most public short-distance passenger transport businesses were reclassed in national accounts, from the non-financial corporations sector to the general government sector. Due to the transfer of these units to the general government sector, their revenue and expenditure have been accounted for in the general government account from the 2nd quarter of 2023 onwards.

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.

More information:

For further results regarding the revenue and expenditure of general government and the monitoring of the budget situation in the European Union (EU), including the deficit and debt ratios of the EU Member States, please refer to the tables on the EU Stability Pact provided on the “National accounts, domestic product” page of the Federal Statistical Office’s website.

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