Budget Outlook, August 2009


The central government budget proposal for 2010 is presented today. The proposal includes substantial increases in public investments.

Total public investments are expected to increase from a yearly level of DKK 31¼bn in 2004-2008 to DKK 42½bn in 2010. The real growth rate in public investment is expected to reach approx. 15 per cent per year in 2009 and 2010. Thus, for the first time since the 1960’s two-digit growth rates are expected for two consecutive years.

The government budget proposal for 2010 implies a deficit on the current, investment and lending account, i.e. the CIL-account, of approx. DKK 91bn in 2010, cf. Budget Outlook 2, August 2009. The deficit in 2009 is estimated at DKK 26½bn.

The deficits in 2009 and 2010 are mainly to be seen in light of the weak cyclical conditions implying lower revenues from taxes and duties and higher expenditures on unemployment benefits and easing of fiscal policy.

The deficit at the net balance is estimated at DKK 132¼bn in 2009 mainly due to relending in relation to the financial crisis. In 2010 a deficit of DKK 109½bn is expected primarily due to the deficit on the CIL-account.

Due to the substantial net balance deficits central government debt is estimated to increase by DKK 241¼bn from 2008 to 2010. When adjusted for relending related to the financial crisis central government debt is estimated to increase by DKK 132bn from 2008 to 2010.

The general government deficit is estimated at DKK 33½bn in 2009 and DKK 86¼bn in 2010, which corresponds to 2 per cent of GDP in 2009 and approx. 5 per cent of GDP in 2010.

The structural budget balance surplus is estimated at 2¼ per cent of GDP in 2008 and ¼ per cent of GDP in 2009, while a deficit of 1¼ per cent of GDP is estimated in 2010. The reduction of the structural budget balance primarily reflects the discretionary fiscal policy in 2009 and 2010.

Measured by the fiscal effect fiscal policy is estimated to stimulate economic activity by 0.9 per cent of GDP in 2009 and 0.7 per cent of GDP in 2010. Furthermore, the release of special pension (SP) funds is estimated to stimulate activity corresponding to 0.3 per cent of GDP in 2009. In total discretionary fiscal policy and the release of the SP funds in 2009 and 2010 is estimated to increase the level of GDP by approx. 2 per cent in 2010.

The estimates for the general government and central government finances are based on the short term projections for the Danish economy, cf. Economic Survey, August 2009.

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