BERLIN, March 18 (Reuters) - The German government’s balanced budget plan for 2020 calls for a 1.7 percent hike in spending to 362.6 billion euros, relying on cost-cutting to avoid incurring new debt given forecasts for slower economic growth, Finance Ministry sources said on Monday.
The plan assumes Germany’s economy - the largest in Europe - will grow by 1.0 percent in 2019, down from the 1.8 percent initially projected, the sources said.
To balance the budget, the government ministries will have to identify combined spending cuts of 625 million each year, the sources said.
The budget foresees boosting the share of defence spending to 1.37 percent of gross domestic product (GDP) in 2020 from 1.25 percent in 2018, but dropping back to around 1.25 percent in 2023, the sources said.
That is below the 2 percent target set by NATO members for 2024, and below the 1.5 percent share that Germany has pledged to meet by that date. The sources said further increases would be negotiated year to year.
Reporting by Andrea Shalal; editing by Thomas Seythal