Denmark Publishes Its 2010 Budget Proposals

by Ulrika Lomas, Tax-News.com, Brussels

27 August 2009

The Danish government budget proposals for 2010 have been published. Large surpluses on the general government budget balance in the period 2004-2008 are expected to turn to large deficits in 2009 and 2010. Deficits have been revised upwards by nearly 50% for 2009 and over 40% for 2010, since May 2009.

The general government deficits for 2009 and 2010 are estimated at DKK33.5bn (USD6.5bn) and DKK 86bn(USD16.7bn) respectively. Next year the fiscal deficit is expected to exceed the EU reference value of 3% of GDP. The surplus in 2008 of 3.4% of GDP is expected to turn into a deficit of 2.0% in 2009 and 4.9% in 2010.

A considerable effort will be necessary to consolidate public finances in order to reach balance by 2015. Minister of Finance, Mr. Claus Hjort Frederiksen, stated: "The key priority is to support demand and employment in the short run, and to make sure, that public deficits are temporary and in line with medium term fiscal targets as set out in the 2015-plan."

The reduction of the structural budget balance primarily reflects fiscal stimulus measures in 2009 and 2010. Fiscal stimulus measures are estimated to stimulate economic activity by 0.9% of GDP in 2009 and 0.7% of GDP in 2010. In addition the release of special pension (SP) funds is estimated to add 0.3% to GDP in 2009. The combined effect of the stimulus measures is projected to be about 2% by 2010.

The real growth rate in public investment is expected to reach about 15% per year in 2009 and 2010. This would be the first time since the 1960s that two-digit growth rates are expected for two consecutive years.

At the same time, public investment is expected to reach 2.25% per cent of GDP in 2010, the highest level since 1981. The central government budget proposal for 2010 includes major initiatives amounting to nearly DKK 17bn (USD3.3bn) in 2010. These are primarily investments in hospitals, schools, day-care facilities and the elderly-care sector but also in research and education including technological investments in university laboratories.

Recommended