Budget Outlook 1: Denmark is expected coming out of EU Recommendation
Today the Ministry of Finance publishes Budget Outlook 1, May 2014 which contains a status of fiscal policy and general and central government finances. According to Budget Outlook 1 the general government deficit is estimated to remain below 3 per cent of GDP. Thus, Denmark’s EU recommendation is expected to be abrogated at the next meeting among the Economic and Finance Ministers of the EU (ECOFIN).
The public deficit amounts to 0.9 per cent of GDP in 2013. According to the European Commission’s 2014 spring forecast the deficit is estimated to remain below 3 per cent of GDP in 2014 and 2015. These estimates will be presented to the ECOFIN council and Denmark’s EU recommendation is expected to be abrogated at the ECOFIN meeting in June.
According to Budget Outlook 1 the government estimates a public deficit of approximately DKK 26¾bn in 2014 (1.4 per cent of GDP) and DKK 58½bn in 2015 (3.0 per cent of GDP). Measured on EDP-basis – which is method used by the European Commission – the public deficit is estimated to 1.3 per cent of GDP and 2.9 per cent of GDP in 2014 and 2015 respectively.
The Minister of Finance Bjarne Corydon comments:
The government has conducted a responsible economic policy, and the current outlook is that Denmark’s EU-recommendation will be abrogated.
It strengthens the confidence in the Danish economy that we conduct a responsible economic policy within the fiscal framework of the Budget Law and the EU’s Growth and Stability Pact.
While we have obtained sound public finances, we have also prioritized funds for improved public welfare. Despite a limited room for maneuver, we have made it possible to boost public welfare with around DKK 3bn each year towards 2020.
The government has also invested extensively in creating growth and jobs with the Kick Start, the infrastructure fund of Togfonden DK, tax credits and Agreements on Growth DK. Recently, the government has proposed the growth initiative ”Danmark helt ud af krisen – virksomheder i vækst” which contains 89 initiatives aiming at increasing private sector growth and stimulate job creation.
The deficit on the structural balance is estimated to 0.7 pct. of GDP in 2014. The larger deficit than previously expected should be viewed in light of the uncertainty when assessing the actual balance, including the public expenses and revenue.
When the 2014 budget was presented and when the 2014 budget was agreed, the structural balance for 2014 was within the limits of the budget law.
Given the expected fiscal policy of 2015, the deficit on the structural balance is expected to 0.4 per cent of GDP. Thus, the actual as well as the structural deficit in 2015 are close to the limits in the Budget Law and in the EU's Stability and Growth Pact.
The deficit of the central government account (the CIL-account) is estimated to DKK 38½bn. in 2014 or 2.0 per cent of GDP. Based on an updated status for central government spending in 2014, the expenses are estimated to be within the expenditure ceilings of the central government.
The estimates for the general government and central government finances are based on the short term projection for the Danish economy, cf. Economic Survey, May 2014 that includes an updated assessment the economic outlook for the Danish economy towards 2015.
Read more about Budget Outlook here.