Government budget proposal for 2012, key figures in the spending limits decis...
The Government's budget proposal for 2012 totals EUR 52,3 billion. The proposal is EUR 7,1 billion in deficit. On-budget expenditure is up by around 3,5% from the 2011 ordinary Budget and about 1,5% from the sum budgeted in 2011(including the third supplementary budget proposal). Automatic stabilisers such as changes in the price level and higher pension expenditure partly explain the rise in the expenditure level. In addition, state debt interest expenses, which are budgeted at EUR 2.2 billion in the budget proposal, will increase in 2011.
In line with the Government Programme, central government expenditure will be adjusted to ensure that public finances remain on a sustainable basis. The budget proposal includes expenditure cuts for a total of EUR 1.1 billion. However, resources for objectives identified as priorities in the Government Programme, such as fighting the shadow economy and reducing youth and long-term unemployment, will be increased by EUR 410 million.
On-budget revenue is expected to increase by about 5% in 2012 from the figure budgeted in 2011. Tax receipts account for around 85% of all on-budget revenue and are anticipated to grow by 6%. A net of over EUR 200 million of the total EUR 2.1 billion increase in tax revenue from the sum budgeted for 2011 derives from changes in the tax bases and the rest from growth in the tax bases. The focus in taxation will shift from the taxation of labour and entrepreneurship, which hampers economic growth, towards the taxation of environmental and health-based factors. Taxes on earned income and corporate income will be eased the most whereas excise duties, especially energy, passenger cars and alcohol and tobacco, will become heavier.
Government debt will grow by EUR 7 billion, thus totalling EUR 89 billion, which is about 44% of GDP.
Revised central government spending limits for 2012-2015
The new government will pursue the spending limits procedure, in other words it will observe the spending rule controlling on-budget expenditure developments that covers the entire election period. The government's spending limits decision consists of spending limits for 2012-2015, which will be calibrated so that a net reduction of EUR 1.216 billion will be generated at the level of 2015, as outlined in the Government Programme, relative to the earlier spending limits decision made in March 2011 by the previous government.
Extra resources amounting to EUR 700 million at the 2015 level will be allocated over the government term to the priorities listed in Appendix 2 of the Government Programme. Correspondingly, based on Appendix 2 of the Government Programme, cuts in expenditure in the spending limits will total around EUR 2,1 billion. The government will earmark EUR 200 million in the spending limits annually for supplementary budget needs.
On-budget revenue is estimated to grow by an average of 4.3 % annually over the spending limits period (2011-2015). Growth in tax revenue is estimated to be slightly more, about 4.7%.
Government debt is forecast to increase by about EUR 26 billion over the spending limits period, meaning that the debt-to-GDP ratio will rise to approximately 48.% in 2015.
The third supplementary budget for 2011 will be submitted to Parliament in 30 September. The budget proposal for 2012 and the revised spending limits for 2012-2015 will be presented in 5 October
|
2011 |
2012 |
2013 |
2014 |
2015 |
Revenue* |
43,1 |
45,3 |
47,0 |
49,2 |
50,9 |
Expenditure EUR billion |
51,3 |
52,3 |
54,0 |
55,1 |
57,0 |
Deficit EUR billion |
8,2 |
7,1 |
7,0 |
5,9 |
6,1 |
Government debt (% ) relative to GDP |
43 | 44 | 46 | 47 | 48 |
*excluding the use of the cumulative surplus
Weaker economic outlook
World economic growth has now peaked. Growing uncertainty during the summer months has made prospects bleaker both in the international economy as well as in the domestic one. This year the Finnish economy is estimated to grow reasonably well still, boosted by domestic demand. Exports are also perking growth in the economy, although less so than before. Next year economic growth will slow down. This is due to weakening export demand and because investment has become more cautious as a result of the uncertainty in the economy. With economic activity slackening, the reduction in unemployment is expected to be slow. The rise in consumer prices will remain over 3% both this year and next.
This year the general government budgetary position will be improved by the recovery of economic growth, higher indirect tax rates and the phasing out of stimulus measures. Nonetheless the substantial deficit in central government finances means that general government will continue to be in deficit. The fiscal adjustment measures specified by the Government will improve central government's budgetary position next year. However, the deficit in central government finances will remain over 3% of GDP. The cuts in central government transfers to local government will tighten local government finances. Given that the budgetary position in both central and local government will stay in deficit, general government indebtedness will continue to grow.
Economic forecast for Finland change in volume, %
|
2008 |
2009 |
2010 |
2011** |
2012** |
GDP at current prices Imports of goods and services |
1.0 7.3 |
-8.2 -16.1 |
3.6 7.4 |
3.5 3.7 |
1.8 2.9 |
Total supply Exports of goods and services Consumption Investment Total demand domestic demand |
2.8 5.9 1.7 -0.8 2.8 0.6 |
-10.6 -21.5 -1.9 -13.5 -10.6 -6.4 |
4.6 8.6 2.1 2.8 4.6 3.1 |
3.5 4.3 2.6 5.6 3.5 4.2 |
2.1 3.5 1.3 0.9 2.1 1.5 |
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Unemployment rate % Consumer price index, change, % |
6.4 4.1 |
8.2 0.0 |
8.4 1.2 |
7.9 3.5 |
7.6 3.3 |