Budget Outlook, august 2011


Budget Outlook 2, August 2011 includes an overview of central and general government finances in 2011 and 2012.

The central government budget proposal for 2012 reflects the agreements in the Reform Agenda 2020, May 2011 including Agreement on Later Retirement and Making ends Meet. In line with the Fiscal Consolidation Agreement the budget proposal reflects among other things increased expenditures to qualifying education, health care, marginalized groups and a digitalization-strategy for the public sector.

In 2012 the central government’s CIL-account deficit is estimated at DKK 79¾bn and the net financing requirement at DKK 76¼bn. Compared to 2011 an increase of DKK 36¼bn in the CIL-account deficit and DKK 38¼bn in the net financing requirement is expected. The higher deficit reflects the release of early retirement contributions in 2012 of approx. DKK 17bn and an expected reduction in the payments from the pension yield tax from 2011 to 2012 as a result of the development in the stock market.

The general government budget deficit is estimated to 2.8 per cent of GDP in 2010, 3.8 per cent of GDP in 2011 and 4.6 per cent of GDP in 2012. However the general government’s finances are estimated to improve from 2010 to 2012 as a result of the Fiscal Consolidation Agreement that meets the recommendations from the EU-Commission to strengthen the structural budget balance by 1½ per cent of GDP in 2011-2013. The structural budget balance is expected to improve by ¾ per cent of GDP from 2010 to 2012.
In 2012 the fiscal policy including the release of early retirement contributions is expected to have an almost neutral effect on economic activity. 

Fiscal policy in 2009-2011 is expected to stimulate activity by ¼ per cent of GDP in 2011 although the projected fiscal effect in 2011 is estimated -0.3 per cent of GDP. However, the substantial ease of fiscal policy in 2009 and 2010 is expected to increase activity by ½ per cent of GDP in 2011.

The estimates for the general and central government finances are based on the short term projections for the Danish economy, cf. Economic Survey, August 2011, while the government’s fiscal package, Sustained Growth, is not incorporated in the estimates.

With Sustained Growth the Home Renovation Job Plan is improved, homebuyers get at tax credit, and public investments are brought forward, which further increases activity by 0.3 per cent in 2012 and employment by 6-8.000.

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