The Economic and Fiscal Outlook released with yesterday’s budget presents a useful table of the general government accounts. This is the accruals-based set of accounts by which the Excessive Deficit Procedure limits under the Maastricht Treaty are set. It is the deficit on these accounts that must be reduced to below the 3% of GDP limit by 2015. Click to enlarge.
The €13.4 billion deficit for 2012 is the result of expenditure at €69.1 billion and income at €55.6 billion. When the projected deficit gets below the 3% of GDP limit in 2015 it will still be €5.3 billion and this will be the result of expenditure at €68.4 billion and income at €63.1 billion.
In nominal terms over the next three years general government expenditure is projected to fall by 0.9% with nominal general government revenue due to rise by 13.3%.
With inflation and rising GDP, real expenditure will fall while there will be a slight rise in real income. As a percentage of GDP, expenditure will fall from 42.3% in 2012 to 37.7% 2015. On the revenue side, the change will be from 34.1% of GDP in 2012 to 34.8% of GDP in 2015. As shown below this is projected to bring the deficit to 2.9% of GDP by 2015.
Excluding interest payments, it can be seen that the projected improvement in the primary balance is even greater. This means that although overall nominal expenditure might remain largely unchanged there will be changes in the composition of expenditure with interest consuming a greater amount and standard government expenditure a lower amount.Tweet