Lower public deficits, Budget Outlook 1, May 2012

Today, the Ministry of Finance publishes Budget Outlook 1, May 2012. A key message is that lower public deficits are expected compared the December estimates. The lower deficits are primarily due to larger revenues from the pension yield tax and personal income taxes.

The central government CIL-account deficit is estimated at DKK 54bn in 2012. That is a downward adjustment of DKK 33½bn compared to the budget bill for 2012. Furthermore the net cash balance – which is closely related to central government debt developments – is estimated at DKK 48½bn, which is a downward adjustment of DKK 30½bn compared to the December estimate.

The general government budget deficit is estimated at DKK 70½bn in 2012 (3.8 per cent of GDP) and 32½bn in 2013 (1.7 per cent of GDP). That is DKK 30½bn (1.7 per cent of GDP) and DKK 15½bn (0.8 per cent of GDP) lower concerning 2012 and 2013, respectively, when comparing with the December estimates.

The structural budget balance is given by the actual balance adjusted for cyclical effects and other temporary factors, including the large fluctuations in the revenue from the pension yield tax. Given a continuation of the government’s economic policy and responsible economic agreements with municipalities and regions the structural budget is estimated to be strengthened from a deficit by 1½ per cent of GDP in 2010 to structural balance in 2013. Thereby, Denmark will meet the EU recommendation which requires a strengthening of the structural budget by 1½ per cent of GDP in 2011-2013.

The Minister for Finance Bjarne Corydon says:

It is positive that lower public deficits are expected, but the deficits are still substantial. This underlines the need for action, and therefore the government is planning several reforms, including labour market reforms and a tax reform.

The fiscal effect is estimated at 0.5 per cent of GDP in 2012. The fiscal stimulus in 2012 reflects a real growth in public investments of 11 per cent, repayment of early retirement contributions and a real growth rate in public consumption of 1.3 per cent.

The Minister for Finance Bjarne Corydon says:

We expect that the economy will gain more momentum during 2012 and 2013 partly as a consequence of the Kick-start of the Danish economy and the repayment of early retirement contributions. We invest in public school, hospitals, roads as well as renovation of social housing. Furthermore the energy agreement strengthens growth in 2012 and 2013 by increasing investments.

The estimates for general and central government finances are based on short term projections for the Danish Economy, cf. Economic Survey, May 2012. 

Read more about Budget Outlook, May 2012 here