Brakes on energy prices have been driving government expenditures, official data shows
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The German government budget deficit surged to €42.1 billion ($45.4 billion) in the first half of 2023 amid Berlin’s efforts to rein in inflation and energy prices, the Federal Statistical Office (Destatis) reported on Friday.
According to preliminary data, the figure was €37.6 billion higher than in the first half of 2022, a nearly tenfold increase. When measured against the gross domestic product (GDP) at current prices, the deficit ratio was 2.1%.
According to Destatis, government revenue amounted to €917.2 billion in the reporting period, while expenditure was €959.3 billion. The latter spiked sharply since last year, by 7.7%, largely due to the federal government’s relief packages that aimed to alleviate the pressure from high inflation and the surge in 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,” the report stated.
It noted that additional expenditures came from the reform of federal funding for energy-efficient buildings, which sparked a rise in investment grants. Meanwhile, the government’s interest payments were up 38% in the first half of 2023 compared to the same period in 2022.
Despite remaining the EU’s largest economy, Germany has been struggling with the fallout from the energy crisis and persistently high inflation since last year. Heavily reliant on energy imports from Russia, the country was among the hardest hit by the reduction in Russian energy deliveries, which were either significantly curtailed or entirely halted after the EU imposed sanctions on Moscow in response to the conflict in Ukraine. This resulted in elevated energy costs, which in turn have been driving up prices in other sectors of the economy.
According to recent forecasts, energy prices in Germany are likely to remain high until at least 2027, which means that additional support measures may be necessary to avoid another crisis.
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