Revenues surge in the first half-year
Although the economy is currently sluggish, the Federal government's tax revenues have significantly improved in the first half of 2024 compared to 2023. Nearly five percent more revenues were collected. At the same time, expenditures have decreased. However, fiscal policymakers cannot breathe a sigh of relief.
The Federal government collected slightly more taxes in the first half of 2024 than in the same period of the previous year. According to the Finance Ministry's monthly report, tax revenues amounted to 176.5 billion Euro - an increase of 4.6 percent or 7.8 billion Euro compared to the first half of 2023. In addition, there were approximately 20 billion Euro in other revenues, including interest earnings, toll collections, and revenues from the sale of participations.
On the other hand, expenditures of the Federal government decreased by around four percent primarily due to lower interest payments. However, the Federal government had to dig deeper into its pockets for social benefits and subsidies to the pension insurance than in the first half of 2023.
The Federal budget had a financing deficit of 23.6 billion Euro at the end of June, according to the report. Income and expenditures are subject to significant fluctuations throughout a fiscal year, so no conclusion can be drawn for the annual balance.
Second Half of the Year Expected to be Even Better
Moreover, the Federal government plans to take on an additional 11.3 billion Euro in supplementary budgets, which will help cover the additional needs for social benefits. This is possible even with the debt brake in effect due to the weak economy.
Tax revenues for the Federal and state governments have significantly increased in June. They rose by 6.2 percent compared to the previous year, reaching 91.72 billion Euro. In the first six months, the increase was 3.6 percent, with a total of 414 billion Euro in revenues. Experts forecast a total of around 864 billion Euro for the entire year 2024. The monthly report referred to forecasts from leading economic research institutes, indicating that the economy is expected to recover in the second half of the year.
Christian Lindner, the Finance Minister, commended the improvement in tax revenues, crediting the Debt brake policy for maintaining fiscal discipline during challenging times. Despite the improved situation, Lindner emphasized the need for prudence in domestic policy, as revenues are not yet stable enough to substantially reduce the budget deficit.
The improved revenues have also allowed the government to consider additional expenditures in certain areas, such as social benefits, without violating the Debt brake constraints. However, this increases the importance of careful budgeting and continued focus on increasing revenues through sound domestic policy.
