German regional governments expect another overall surplus this year even as the central government runs a deficit and the economy worsens, the Bundesbank said on Friday.
As Germany grapples with soaring energy costs that have truncated its post-pandemic recovery, the picture for its 16 states is generally rosier, thanks to higher taxes and robust federal aid.
In total, these so-called Bundeslaender recorded a budget surplus of 5 billion euros ($4.87 billion) last year and are expected to record another surplus this year, the German central bank said in its monthly report. .
Rhineland-Palatinate stood out last year thanks to rising revenue from local COVID-19 vaccine maker BioNTech.
“For the current year, the prospect is for a large surplus and in the event of a worse-than-expected outcome, there are sufficient reserves in most cases,” the Bundesbank said in its monthly report.
“In any case, the federal government will shoulder the vast majority of the burden of the current energy crisis.”
The German federal government recorded a deficit of 42.8 billion euros in the first half of the year, partially offset by a surplus of 16 billion euros for German states and smaller ones for local authorities, according to the statistics agency Destatis.
The Bundesbank also reiterated its forecast of a recession in the last three months of this year and the first three months of next as high energy costs and falling exports take their toll.
“Overall, economic output could drop significantly during the winter months,” the Bundesbank said.
He added that the extent of the drop would depend on how the government tackled high gas and electricity prices. ($1 = 1.0267 euros) (Report by Francesco Canepa)