German deficit forecast at 1.75% in 2024, says stability council

GERMANY’S general government deficit is forecast to be around 1.75 per cent of gross domestic product in 2024, falling to around 1 per cent in the next year, said the German stability council, which coordinates federal government and state finances.

The structural government deficit, which is adjusted for cyclical and certain one-off effects, is expected to be around 1.25 per cent of GDP in 2024, falling to around 0.75 per cent in 2025 and then rising again slightly in the following two years, added the council on Monday (May 6).

At the end of the projection period in 2028, the deficit should be at around 1 per cent of GDP, according to the estimates of the council, a body with the aim of safeguarding the long-term sustainability of public budgets.

The council’s advisory board considers the projected deficit ratios to be plausible but sees a considerable need for restrictive fiscal policies to actually achieve them.

“A moderately restrictive fiscal policy not only acts as a brake on inflation. It also makes it possible to create sustainable scope for investment,” German Finance Minister Christian Lindner said on Monday at a press conference after the meeting of the council.

Nevertheless, the council noted that Germany will not comply in the projection period with EU fiscal rules, known as the Stability and Growth Pact, which establish a ceiling for a structural deficit of 0.5 per cent of GDP. REUTERS