Appropriations under the 2009 budget proposal total EUR 45.8 billion
Government reached agreement on content of 2009 budget proposal. Appropriations under the 2009 budget proposal total EUR 45,8 billion, including EUR 2.4 billion for interest payments on central government debt. Exclusive of the impact of structural changes, appropriations are up by 1,1% in real terms on the 2008 Budget. Appropriations will increase by a total of EUR 2 billion.
Expenditure growth will slow considerably from this year, which is in line with the Government Programme.In order to ensure the sustainability of public finances, the Government has set the target of a structural central government surplus equivalent to 1% of GDP at the end of its term in 2011. To address the cost pressures building as a result of population ageing, the sustainability of public finances will be bolstered by structural reforms and by responsible expenditure and tax policies.
Tax revenue to increase by one per cent
In 2009 central government revenue is projected to reach EUR 45,9 billion. Some 85% of this will come from taxes and tax-like revenue, which are estimated at EUR 39 billion. Tax revenue will be up 1% compared to the 2008 Budget. The growth in tax revenue will be slowed by the substantial tax cuts and the anticipated economic slowdown. It is projected that revenue from sources otherthan tax receipts will remain at the same level as in the Budget for the current year. Income from the European Union will decrease by EUR 193 million, but on the other hand transfers from pension funds and the Housing Fund will increase by EUR 138 million.
Surplus has shrunk
The budget proposal for 2009 shows a surplus of EUR 153 million. At year-end 2009 central government debt is projected to stand at EUR 54 billion, and the debt-to-GDP ratio will edge down to just below 27% of GDP.
In national accounting terms, it is forecast that the central government surplus in 2009 will be 0.8% of GDP
In addition to on-budget activities, central government finances comprise 11 off-budget activities, the most significant of which are the Housing Fund of Finland and the State Pension Fund. In 2009 off-budget activities are expected to show a surplus of EUR 1.4 billion.
As the economic outlook continues to darken, the surplus in general government finances is expected to shrink to 3.6 per cent in relation to GDP in 2009. General government debt will continue to fall to just under 31% of GDP. General government comprises not only central and local government, but also the employment pension sector, which is heavily in surplus, and other social security funds.
Appropriations and spending limits
The Government proposal for appropriations under the spending limits comes to EUR 35.5 billion. The unallocated reserve is proposed at around EUR 120 million, which is in addition to the annual EUR 300 million reserve for supplementary budgets. Proposed expenditure outside the spending limits for 2009 is EUR 10.2 billion.
Local government finances set to remain sound next year
Despite the general economic slowdown, the review of the basic public services budget suggests that government finances will continue to remain sound in 2009. The tax base is sustained by the rise in the general earnings level. The growth of municipal tax revenue,however, is set to slow as employment is no longer increasing and as the income tax cuts will be partly financed through municipal taxation. Corporate tax revenue in local government is expected to decrease somewhat from 2008 levels. On the other hand other local government revenue will increase considerably. The tax cuts will be offset by increasing central government transfers to local government, and increased municipal amalgamation subsidies and higher customer fees will contribute to sharply increasing operational revenue in local government.
Further information: Hannu Mäkinen, Budget Director, tel. 358 9 160 33036 and Markus Sovala, Deputy Budget Director, tel. 358 09 160 33105