Germany's budget deficit rose last year to its highest level in 30 years, reaching nearly 200 billion euros, as a result of the repercussions of the Corona pandemic.
This deficit is the first since 2013, at a time when government spending rose to 1.7 trillion euros, and tax revenues decreased to 1.5 trillion euros.
The German economy is suffering from the repercussions of a third wave of Corona, and it is expected that the government will impose a closure on many commercial establishments until the end of this month.
The German central bank (Bundesbank) said, on Tuesday, that the country's economy is likely not to meet its growth expectations for the current year, at a time when restrictions related to the pandemic are pressing on the growth of the economy, but the recovery next year will be faster than previously thought.
Germany is fighting a third wave of Coronavirus infections and discussions are being held to impose longer and possibly more stringent restrictions, and this confuses the central bank's expectations, which were based on reopening the economy at a faster rate.
“The measures to contain (the pandemic) in the past few months have been more stringent and are likely to remain so in the near future,” the bank’s president, Jens Weidmann, told Reuters. This reduced the probability of achieving a 3% growth rate this year as we expected in December. ".
"But growth will be higher next year ... From today's perspective, the medium-term economic outlook is not in great doubt."
Earlier, the bank expected growth of 4.5% in 2022, and 1.8% in 2023.
Bright spot
A survey showed, today, Wednesday, that the growth of the private sector in Germany accelerated last March to the highest level by more than 3 years, while the services sector recorded a surprising good performance despite the restrictions of the Corona virus.
The final reading of the IHS Markit Purchasing Managers' Index in the services sector jumped to 51.5 points last month, compared to 45.7 in February the previous month.
Phil Smith, economist at IHS Market, said the improvement was mainly due to easing restrictions on some stores and services, while the authorities extended some restrictions to this April.
The performance of the services sector, which exceeded expectations, contributed to the IHS Markit composite index rising to 57.3 points, compared to 51.1 points last February.
PMI data released last week showed that factory activities in Germany grew at the fastest pace on record in March thanks to demand from the United States and China.