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Published: 01/07/2022

Monthly Information, January 2022

According to provisional data, the state budget deficit amounted to EUR –3.098 billion in 2021, while without the direct effect of COVID-related measures, the deficit would have amounted to EUR –705 million. The deficit in both comparisons was smaller than in 2020, which is mainly the result of the revenue growth as economic activity has recovered.

Last year, revenue was 23.1% higher than in 2020 or 14.6% higher without taking into account the direct effect of COVID-related measures.

Last year, expenditure was 13.6% higher than in 2020 or 8.7% higher without taking into account the direct effect of COVID-related measures totalling EUR 2.790 billion. The latter was predominantly due to investment and higher labour costs.

The total level of state budget expenditures for COVID-related measures from March 2020 to the end of December 2021 amounts to EUR 4.795 billion. The largest individual measure was allowances to employees of EUR 1.026 billion, of which EUR 822 million were paid last year.

The actual implementation of the state budget confirms the Fiscal Council’s concerns that the estimate of the outturn for 2021 prepared by the Ministry of Finance in September 2021 was unrealistic and as such inadequate for the preparation of the budget projections for 2022. This is in particular the case for the expectations on the level of expenditures (see Figure 2) which were in fact around EUR 700 million lower and also below the expenditure ceiling set in the revised framework for drafting general government budgets in April last year. The October revision of the framework, in which the expenditure ceiling was increased again, was therefore not necessary, because the outturn indicates that the Government could have only adopted a revised budget for 2021 in accordance with the established procedures.

Preparing the budget documents for 2022 on the basis of an overestimated outturn for 2021 means that the projected level of expenditure for 2022 exceeds the level justified on the basis of the measures and legislation currently in force. The actual outturn for 2021 and the adopted budget for 2022 indicate that the growth of state budget expenditure, excluding the direct impact of COVID-related measures and investments, is expected to be 8.0% this year, which is even higher than in the previous two years and one of the highest growth rates ever (see Figure 3). State budget expenditure, excluding the impact of COVID-related measures and investments, could thus increase by around EUR 820 million this year, while at the time of the adoption of this year’s budget based on the estimate of the outturn made in September, an implicit growth of EUR 470 million was foreseen. This increases the risks for a structural deterioration of public finance which have already been partly realised by the adoption of some measures following the approved amendments to the 2022 budget. The Fiscal Council thus expects that, at the end of the political cycle, no further measures will be taken that would reduce the manoeuvring room for fiscal policy in the years ahead and that the actual deficit in 2022 will be lower than projected in the adopted budget.

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