Budget Outlook, december 2011

Budget Outlook 3, December 2011 includes an overview of the central government budget for 2012 and updated estimates for the central and general government finances.

In light of the weaker cyclical conditions the general government budget deficit is estimated to approx. DKK 71¼bn in 2011 and DKK 100¾bn in 2012 corresponding to 4.0 per cent of GDP in 2011 and 5.5 per cent of GDP in 2012. Due to the crisis lower tax revenues and higher expenditures are expected. In addition, repayments of early retirement contributions in 2012 increase the general government budget deficit by approx. 1 per cent of GDP. In 2013 the budget deficit is estimated at 2.6 per cent of GDP.

The Minister of Finance, Bjarne Corydon, says:

The international growth prospects have weakened during the fall, hence lower tax revenues and higher income transfers are expected. On this background the deficit on the general government budget balance is estimated to increase to DKK 70bn in 2011 and DKK 100bn in 2012.

The structural budget balance, which is adjusted for the cyclical position of the economy and other temporary factors, is estimated to be strengthened by 1½ per cent of GDP in 2011-2013. Thereby, Denmark will meet the EU recommendation to bring the deficit below 3 per cent of GDP in 2013.

In order to support growth and employment investments of DKK 10¾bn in 2012 and DKK 8bn in 2013 is brought forward as a part of a kickstart of the Danish economy. The fiscal stimulus package includes public investment in roads, schools and hospitals etc. as well as renovation of social housing and new energy related investments.

The fiscal effect is estimated to 0.4 per cent of GDP in 2012. This reflects the fiscal stimulus package and the repayments of early retirement contributions. In 2011 the fiscal effect is estimated to -0.2 per cent of GDP.

The budget for 2012 includes new initiatives, which is fully financed by tax increases, use of general reserves and other measures. New initiatives include improved conditions for unemployed, measures to reduce youth unemployment and increases in certain social assistance allowances. Further, additional means are allocated to the health sector as well as to research and education.

Based on the budget for 2012 the central government CIL-account deficit is estimated at DKK 87¾bn, while the CIL-deficit is estimated at DKK 49¼bn in 2011. The higher deficit in 2012 compared to 2011 primarily reflects lower expected revenue from the pension yield tax and the repayments of early retirement contributions in 2012. The net cash balance is estimated to DKK 33bn in 2011 and DKK 79bn in 2012.

The estimates for the general and central government finances are based on the short term projections for the Danish economy, cf. Economic Survey, December 2011.

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