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Germany increases tax revenues and fiscal surplus in Q1

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Christian Fernsby |
German seaport
Europe   German sales tax rose by 1.9 percent compared to the previous year

German tax revenues climbed by 1.8 percent to 175 billion euros (about 196 billion U.S. dollars) year-on-year between January and March, according to the monthly report from the Federal Ministry of Finance published on Tuesday.

German sales tax rose by 1.9 percent compared to the previous year, said the report.

Germany achieved a fiscal surplus of 1.7 percent of gross domestic product (GDP) in 2018 and "all levels of government recorded surpluses," the German finance ministry announced.

"The robust development of the labor market with record employment and significantly rising wages, higher tax revenues and, at the same time, considerable interest rate cuts have favored public finances in Germany," said the Ministry.

At the same time, the country's fiscal policy continued to face challenges, such as "early retirement of baby boomers, climate finance" and financing of the European Union budget, read the report.

The German economy "continued to grow in 2018, but lost considerable momentum in the second half of the year," noted the report

Last year, Germany's price-adjusted GDP rose by 1.4 percent compared to the previous year.

This increase was noticeably lower than the growth rates of the two previous years, when GDP grew by 2.2 percent each time.

The Ministry is expecting real GDP to grow by only 0.5 percent in 2019.

This aligned with predictions from some of Germany's leading economic research institutes, which recently forecast GDP to grow by only 0.8 percent in 2019.

The Ministry said the slowdown in economic momentum was "particularly evident in the weaker development of exports", and uncertainties caused by ongoing trade conflicts and a lack of clarity around Brexit contributed to this slowdown.

Nonetheless, the Ministry is expecting economic momentum "to accelerate again in the second half of the year" due mostly to "positive impulses from the domestic economy".

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