The Danish economy is affected by the international financial crisis and the following weak cyclical conditions, cf. Economic Survey, May 2009. The unemployment is rising and the general government finances are weakened.
The previous years’ surpluses on the general government budget balance are now expected to turn into deficits at DKK 22½bn in 2009 (-1.3 per cent of GDP) and DKK 60 bn in 2010 (-3.3 per cent of GDP). Also the central government finances are estimated to decline. The projections of the balance on the current, investment and lending account (the CIL-account) and the central government net balance show deficits in 2009.
Compared to the December projections the government finances are weakened in 2009 and 2010 which primarily reflects lower revenues from taxes and duties as well as higher unemployment expenses.
From 2007 to 2010, the general government finances is estimated to decline by DKK 135bn corresponding to 7¾ per cent of GDP. The considerable shift reflects that the Danish government finances are highly sensitive towards cyclical conditions, the financial markets and the oil prices. At the same time the general government finances are weakened by discretionary fiscal policy measures including lower tax revenues in 2010 following the personal income tax cuts etc. in the Spring package 2.0.
Read Budget Outlook, May 2009