Budget Outlook 1, May 2007


Budget Outlook 1, May 2007

”Danish economy has achieved high employment, low unemployment and large surpluses on the central and general government finances. Hence, the central government debt is reduced, which – together with the reform of the early retirement system – helps to prepare for the demographic challenges”, says Thor Pedersen, Minister of Finance.

The final account for the central government for 2006 reflects a surplus on the current, investment and lending account, i.e. the CIL-account of approx. DKK 98½bn or 6 per cent of GDP. In 2007 the CIL-surplus is estimated at approx. DKK 82¼bn, which corresponds to approx. 4¾ per cent of GDP, cf. Budget Outlook, May 2007.
The large surpluses in 2006 and 2007 are primarily due to high revenues from the North Sea oil and gas activities and the strong business cycle.

The central government surplus is upward adjusted by approx. DKK 15bn in 2006 and 2007 compared to the December estimate. Increased tax revenues especially from the pension yield taxation and personal income taxation together with lower unemployment expenditures contribute to the improved surplus in 2006 and 2007. 

The net balance is estimated at approx. DKK 90¼bn in 2006 and DKK 66¾bn in 2007. In both years, the net balance is lower than the central government surplus, which reflects relending etc.
Central government debt measured as a percentage of GDP is estimated to decrease from approx. 20 per cent of GDP in 2006 to approx. 15¼ per cent of GDP in 2007.

The general government surplus is estimated at approx. DKK 69bn in 2006 and approx. DKK 71bn in 2007 corresponding to 4.2 per cent of GDP in both 2006 and 2007. General government finances include central government, local governments and labour market funds (unemployment insurance funds and the Employees’ Guarantee Fund).

The structural budget balance is estimated at approx. 1½ per cent of GDP on average in the period 2004-2008 after correcting from the impact of the temporary suspension of Special Pension (SP) contributions. In 2004-2008, in average the structural budget balance is in the upper end of the target interval for structural surpluses of ½-1½ per cent of GDP towards 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, May 2007.

Read Budget Outlook 1, May 2007