Budget Outlook, May 2009

For 2008, the final account for the central government reflects a surplus on the current, investment and lending account, i.e. the CIL-account, of DKK 72¼bn. A deficit of DKK 21½bn is estimated for 2009, cf. Budget Outlook 1, May 2009.

The CIL-account surplus for 2008 was DKK 13bn higher than estimated in December mainly due to higher revenues from personal income taxes and the pension yield tax. In 2009, the CIL-account is adjusted downwards by DKK 27¼bn due to increased expenditures for unemployment benefits and lower revenues from taxes and duties following the weak cyclical conditions as well as increased expenditures following the political agreements in the spring of 2009.  

The central government net balance is estimated at DKK -85¾bn in 2009. The large difference between the estimated net balance and the CIL-account primarily reflects relending in relation to the financial turmoil including the political agreement on the Credit package in January 2009.

The central government debt is estimated to increase from 11¼ per cent of GDP in 2008 to approx. 16 per cent of GDP in 2009 corresponding to an increase of DKK 86½bn. When adjusted for relending related to the financial turmoil central government debt is estimated to increase from 11 per cent of GDP in 2008 to 12½ per cent of GDP in 2009.

According to Statistics Denmark, the general government surplus was DKK 63¼bn in 2008. Deficits are estimated to be DKK 22½bn in 2009 and DKK 60bn in 2010. The estimates correspond to 3.6 per cent of GDP in 2008, -1.3 per cent of GDP in 2009 and -3.3 per cent of GDP in 2010.

The shift from relatively large general government budget surpluses in the period 2005-2008 to estimated deficits in 2009 and 2010 reflects the weakening of cyclical conditions and the political agreements on discretionary fiscal policy including lower tax revenues in 2010 due to the tax reform in the Spring Package 2.0. The tax reform implies that tax reductions take effect quickly in 2010 and 2011, while the financing elements are implemented gradually until 2019.

Structural surpluses of 2½ per cent of GDP in 2008 and approx. 1 per cent of GDP in 2009 are estimated to turn to a structural deficit of ¼ per cent of GDP in 2010. The reduction of the structural budget balance primarily reflects the discretionary fiscal policy easing for 2009 and 2010.

The estimates for the central government finances in 2009 and the general government finances in 2009 and 2010 are based on short term projections for the Danish economy, cf. Economic Survey, May 2009.

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