Comparing Government Balance Deficits and Surplus

Comparing Government Balance Deficits and Surplus

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Introduction

A surplus is an economic financial position where revenue surpasses the expenditure. On the other hand, deficit is a financial position where the expenditure surpasses income. An economic deficit is written off through borrowing funds upon which interest is paid. Government deficit and debt are usually confused whilst there are not the same. Government debt is an accumulation of the total debts, that is, adding up all debts in a country. A surplus has positive implications in a country where it may be used to clear debts, government savings and making purchases (Veick, 2010).

Germany Government Balance Deficit and Surplus

The graphical representation below indicates Germany’s budget balance in relation to GDP for the period between 2006 and 2014. At the onset of the recession in 2007, the country was operating at as surplus of 0.5% to the GDP before it decreased exponentially to -4.0% in 2010. This was fueled by declining exports and decline in industrial output. The country experienced a quick recovery due since unemployment was not greatly affected and regained soon enough (Veick, 2010).