World Economy

Germany Posts Record Budget Surplus in H1

German GDP had grown 0.6% in Q2, a slight slowdown from Q1.German GDP had grown 0.6% in Q2, a slight slowdown from Q1.

The German state notched up a record budget surplus between January and June, official figures showed Friday, as Europe’s largest economy continued to grow strongly.

Government revenue from taxes, social contributions and other sources amounted to €724 billion ($854 billion), a 4.3% increase on the same period in 2016. Spending grew at the same pace, adding 4.3% to reach €705 billion, World Bulletin reported.

With gross domestic product in the first half of the year at €1.6 trillion, the budget surplus stood at around 1.1% of GDP.

“Federal, regional and municipal budgets continued to benefit from favorable developments in the labor market and in the economy, as well as a restrained spending policy,” Destatis commented.

But the authority cautioned that the first-half figures should not be extrapolated to the whole year, as one-off events can have a big impact on government finances.

Allies, neighbors and international institutions frequently criticize Germany for its reluctance to increase investments at home, which some argue could help reduce its mammoth trade surpluses.

The government took in almost €24 billion more than it spent over the full year in 2016.

In a separate release, the statisticians confirmed that German gross domestic product had grown 0.6% in the second quarter, a slight slowdown from the first three months’ 0.7% expansion.

Big increases in both household and state spending between April and June as well as higher investments in capital goods and construction meant that domestic forces were the most important for growth.

Meanwhile, imports expanded faster than exports, at 1.7% compared with 0.7% according to preliminary figures, slightly weakening the contribution to GDP growth from the balance of trade.

So far, strong growth in the first half has not prompted Berlin to revise its full-year GDP forecast upwards from a cautious 1.5% prediction.

Meanwhile, rising corporate investment and private consumption drove Germany’s economy in the second quarter, official data showed Friday, a development that is likely to play into the hands of Chancellor Angela Merkel ahead of elections this fall.

The Federal Statistical Office said the economy grew 2.5% in the three months through June compared with the same period a year earlier and hence confirmed a preliminary growth estimate from Aug. 15.

But fresh details on its composition showed that Europe’s largest economy was propelled by domestic demand, whereas net exports weighed on Germany’s growth rate.

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