BERLIN–Germany’s budget surplus is set to widen significantly this year, highlighting the country’s strong economy and low unemployment level.
The budget surplus will widen to 1.75% of gross domestic product this year, after 1.1% in 2017, projections from the finance ministry show. The surplus will then narrow to 1% in 2019 and gradually fall to a 0.5% surplus by 2022 due to slowing economic growth and extra government spending on social welfare benefits and additional investments.
“We comply with European rules and meet future deficit requirements,” said Finance Minister Olaf Scholz.
Mr. Scholz repeated that the country’s debt would likely fall below 60% of GDP this year.
Under European budget rules, countries are required to keep their budget deficit below 3% of GDP and their national debt below 60% of GDP.
Germany’s public finances have been in surplus since 2014 despite the country’s expanding welfare spending.
Repeated calls from the U.S., the International Monetary Fund and the European Commission for Germany to use its fiscal margin of maneuver to boost infrastructure spending as a way to support long-term growth, while reducing the country’s large current-account and trade surpluses, have however largely fallen on deaf ears.
Mr. Scholz pledged earlier this year to keep the federal budget balanced through 2022 despite increased spending on social welfare, from pensions to child benefits.
For this to happen, Berlin has cut investment from an expected 37 billion euros ($41.96 billion) this year to EUR33.5 billion in 2022, a 9% decline.
In addition, Berlin is expected to continue missing the North Atlantic Treaty Organization’s military spending target.
Andreas Kissler contributed to this article.
Write to Andrea Thomas at [email protected]