The financial turmoil caused by the international debt crisis has continued during recent months, and the IMF, OECD and the European Commission have reduced their growth forecasts considerably.
On this background expected GDP growth for 2011 has been reduced to 1 per cent in 2011 and 2012 compared to 1.3 per cent in 2011 and 1.8 per cent in 2012 in the August projection. In 2013 growth in GDP is expected to 1.4 per cent. The weaker growth prospects in connection with lower expected private consumption and employment contributes to larger general government budget deficits.
In 2011 the general government budget deficit is estimated to approx. DKK 71¼bn corresponding to 4.0 per cent of GDP, and the deficit in 2012 is estimated to DKK 100¾bn or 5.5 per cent of GDP. In 2013 the budget deficit is estimated to DKK 48¼bn corresponding to 2.6 per cent of GDP.
The structural budget balance is estimated to be strengthened by 1½ per cent of GDP from 2010 to 2013. Thereby Denmark will meet the recommendation by the ECOFIN to reduce the deficit below 3 per cent of GDP.
The budget for 2012 includes new initiatives of DKK 9½bn, 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.
Read Budget Outlook, December 2011 here