Budget Outlook 1: Still prospects of deficits in 2013 and 2014

Today the Danish Ministry of Finance presents Budget Outlook 1, May 2013, which includes a status of the general and central government finances. Budget Outlook 1 reflects the continued prospects of deficits in 2013 and 2014, but fiscal consolidation is in line with the EU-recommendation.

In 2013 the deficit of the central government (the CIL-account) is estimated to DKK 24½bn corresponding to 1.3 per cent of GDP. The estimated deficit on the CIL-account for 2013 is thus DKK 7bn larger than projected in the central government budget for 2013.

The general government deficits are estimated to DKK 23bn in 2013 (1.2 pct. of GDP) and DKK 31.1bn in 2014 (1.6 pct. of GDP). The deficits reflect among other things that the slowdown in the international economy has weakened the outlook for the Danish Economy.

The estimated general government deficits in 2013 and 2014 are respectively DKK 23½bn and DKK 23bn lower that projected in December. The lower general government deficits reflect i.a. that a technically assumed temporary revenue of DKK 5 bn in 2013 from reallocation of capital pension schemes has been upward adjusted to DKK 20 bn in both 2013 and 2014 based on banks’ and pension providers’ announcements about intentions and advisory services of customers.

Excluding temporary revenue from reallocation of capital pension schemes the public deficits are estimated to 2.3 pct. of GDP in 2013 and 2.7 pct. of GDP in 2014.

The general government deficit is thus expected to be reduced to below 3 pct. of GDP in 2013, while the structural budget balance is strengthened by 1½ pct. of GDP from 2010 to 2013. This is consistent with the requirements in the EU-recommendation.

The fiscal policy together with other economic-political initiatives from 2012 onwards is estimated to support the level of GDP by 0.5 percent of GDP in 2013 and 0.3 percent of GDP in 2014.

The Minister of Finance Bjarne Corydon says:

The budget deficits emphasize the importance of conducting a sound and responsible economic policy, while at the same time supporting growth and employment in the current economic situation. A sound and responsible economic policy helps to maintain confidence in the Danish economy and to keep low interest rates that support growth and employment

The initiatives in Agreements on Growth Plan DK contribute to a continued historically high level of public investment, and to strengthen the competitiveness of Danish companies, improving the ability to follow a recovery abroad. At the same time, we have adjusted the phasing in of the unemployment benefit reform in order to provide security for many unemployed, who have been hit by the crisis.

The estimates for the general and central government finances are based on the current short term projection for the Danish Economy, cf. Economic Survey, May 2013.

Read more about Budget Outlook may 2013