Budget Outlook, May 2012


There has been some improvement in the international outlook since the end of 2011, where there was great uncertainty about the handling of the debt crisis in a number of European countries, cf. Economic Survey, May 2012. The growth prospects for Denmark are influenced by the improvement in the international outlook. There is nevertheless still substantial uncertainty about the strength of the recovery of the international economy, especially in the euroarea.

The economy is now expected to gain more momentum. This reflects the strong stimulus from lower interest rates, the governments fiscal stimulus package Kick-start and the release of early retirement contributions, but also a significant increase in consumer confidence during the spring. Even though there is expected a modest growth in GDP at 1.1 per cent in 2012 and 1.5 per cent in 2013.

The estimated general government deficit in 2012 and 2013 is noticeably better than expected in the December short term projection. The deficit is now expected to be DKK 70½bn or 3.8 per cent of GDP in 2012 and DKK 32½bn or 1.7 per cent of GDP in 2013. This is a downward adjustment of DKK 30½bn in 2012 and DKK 15½bn in 2013.

According to revised data from Statistic Denmark the general government deficit amounted to DKK 34¾bn in 2011 or 1.9 per cent of GDP. This is DKK 36½bn or 2.0 per cent of GDP lower than expected in December. The lower deficit on the general government finances is primarily due to higher revenues from the pension yield taxation.

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 fiscal effect is estimated at 0.5 per cent of GDP in 2012. The ease of fiscal policy in 2012 reflects the Kick-start, a real growth in public consumption of 1.3 per cent and repayments of the early retirement contributions.