Germany's public debt is at a record high.

Compared to a year earlier, this figure is 2.0% higher, equivalent to 46.1 billion euros; and compared to the end of the third quarter of 2022, public debt increased by 1.8%, equivalent to 41.9 billion euros. According to Destatis, public debt per capita in Germany is 28,155 euros.

At the federal level, as of the end of 2022, federal debt totaled €1,620.4 billion, an increase of 4.6% (equivalent to €71.9 billion) compared to the end of 2021.

Destatis stated that the majority of this increased debt is related to the Economic Stabilization Fund (WSF), which the German government established in 2020 to offset economic losses caused by the Covid-19 pandemic.

In 2022, this stabilization fund was expanded with billions of euros in support to mitigate the consequences of the energy crisis.

Conversely, at the state level, at the end of 2022, the total debt of the states had decreased by 5% compared to the end of 2021, with debt standing at €606.8 billion.

According to Destatis, with the exception of Saxony-Anhalt, where debt levels increased, all other states saw a decrease in debt levels compared to the end of 2021.

The severe crises of the past three years have had significant consequences for Germany's public budget.

To cope with these crises, the German government had to increase its borrowing, causing total debt to rise by 60% (to over 2.1 trillion euros) between 2020 and 2022.

According to the German Federal Audit Office, never before in the country's history have so many new loans been approved in such a short period. This increase in debt poses a serious threat to the state's ability to act and negatively impacts the long-term interests of the people.

Meanwhile, a report by the German Council of Economic Experts indicated that the country's short-term economic outlook has improved in recent months, but only to a limited extent, and the situation remains tense, with inflation continuing to dominate growth forecasts.

According to the report, any increase could be limited by persistently high inflation, tighter financial conditions, and sluggish external demand. The report suggests that the short-term outlook for the German economy has brightened due to initial stabilization of energy supplies and lower wholesale prices.

Experts forecast Germany's Gross Domestic Product (GDP) growth at 0.2% in 2023, higher than previous predictions of a 0.2% decline, and growth of 1.3% in 2024.

Nevertheless, the report indicates that inflation is trending upwards, causing a loss of purchasing power and reducing consumer demand. Meanwhile, rising interest rates negatively impact financial conditions and lead to a decline in investment .

Although inflation may decrease throughout the year, the panel of experts believes it will remain significantly higher than the target, averaging 6.6% in 2023.

Minh Hoa (compiled)

Source