BERLIN (MktNews) - The German federal government's 2001 budget deficit may be DM18 billion larger than now estimated due to lower-than-expected tax revenues and higher-than-expected expenditures, the respected Kiel economic research institute is now forecasting, according to a report to be published in Thursday's weekly WirtschaftsWoche magazine.
According to an economic report to be published next week by the Kiel-based Institute for the World Economy (IfW), German growth this year will be significantly lower than the 2.75% now forecast by the government, the magazine reported, citing Alfred Boss, the top financial expert at the Kiel Institute.
"We are expecting (German) GDP to grow only by between 2.1% to 2.2% in this year," said Boss, who is a member of the government's committee for official tax estimates. In December, Kiel forecast German real GDP this year at +2.4%.
The slower-than-expected growth this year will combine with higher-than-expected spending, in particular on measures to combat BSE as well as foot and mouth disease.
The government's 2001 budget now targets a deficit of DM43.7 billion, down from DM46.5 billion last year. Without additional tax revenue or lower spending, the budget shortfall could mushroom over DM60 billion, which would result in higher borrowing from money and capital markets.
According to Kiel's Boss, some DM5 billion of the possible budget shortfall is the result of lower-than-expected tax revenues, the magazine said. Of this, some DM2 billion is due to lower-than-expected revenues from Germany's ecology tax on fuels, Boss was quoted as saying.
This projected revenue shortfall would continue a pattern that started last year. Full-year 2000 tax revenues amounted to DM388.8 billion, nearly DM6 billion below the November official tax estimate of DM394.7 billion.
Furthermore, Boss expects social security contributions this year to fall short of expectations by around DM4 billion.
Spending may also be DM9 billion higher than budgeted due to unexpected costs of combatting mad cow disease (BSE) of around DM2 billion, higher outlays for the Federal Labor Office of nearly DM5 billion, and an unexpected financial gap of DM2 billion in the defence budget, the magazine said.
The government initially estimated the total cost of combatting BSE, which broke out in Germany late last year, at about DM1 billion.
German Finance Minister Hans Eichel is due to speak to the Bundestag, the lower house of parliament, on Thursday at 8:00 GMT amid mounting speculation about the rising budget deficit.