Germany expects deficit of 4.25%/GDP in 2023 – fin min

BERLIN (Reuters) – Germany expects to post a deficit of 4.25% of gross domestic product (GDP) in 2023, up from a 2.6% deficit the previous year, according to finance ministry calculations published on Wednesday.

Overall, the deficit is projected to be gradually reduced to about 0.75% of GDP by 2026.

“In the crises of the past few years, extraordinary resources were mobilized. This has left visible traces in public finances, so that the consolidation of public finances in the coming years will have to be carried out ambitiously,” the finance ministry said.

These estimates assume a complete outflow of the funds earmarked for the government’s response to the energy crisis. However, it is already becoming apparent that fewer funds will be needed due to falling energy prices, the ministry said.

Without the energy crisis funds, the general government deficit in 2023 would be about 1.25% instead of 4.25%.

The debt-to-GDP ratio is projected to increase to about 67.75% in 2023 from 66.3% in 2022, according to the ministry’s projections. From 2024, the debt-to-GDP ratio is forecast to decline steadily to around 65.5% in 2026.

According to the EU’s Maastricht Treaty, a country’s budget deficit should not exceed 3% of GDP and the overall government debt should not exceed 60% of GDP. The rules will remain suspended until the end of the year after first being paused in 2020 in response to the COVID-19 pandemic.

The European Commission is expected to publish on Wednesday its legislative proposal for the EU’s new fiscal rules, which seeks to adjust the bloc’s rules to the post-pandemic realities of high debt and significant investment needs.

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