Economy & Politics

The state deficit less heavy than expected … in 2019

While public spending for this year is soaring and revenues lower than expected, Luxembourg’s budget for last year was better than initially expected. In deficit however.

While public spending for this year is soaring and revenues lower than expected, Luxembourg’s budget for last year was better than initially expected. In deficit however.

(pj with Susy Martins) Some will see a glass half full, others half empty. In any case, the country’s real budget deficit for 2019 would be less deep than envisaged at the time of establishing the forecasts for the public accounts. The information is reflected in the report on the budget execution project that the Minister of Finance, Pierre Gramegna (DP), has just tabled in the Chamber.

Thus, the government had counted on a hole in the coffers of 815.3 million euros for last year. The difference between income and expenditure would be no more “than” 128.8 million euros. How to explain the difference of 686.5 million euros? Obviously because of much more tax revenue than expected. Their final amount exceeded by 4.87% the “fit” initially planned by the executive.


The Minister of Finance sees public spending spinning faster than expected at the time of presenting his 2020 budget. But the deficit observed today, in the eyes of Pierre Gramegna “strengthens the capacity of the economy to restart”.


Regarding the spending of the 2019 budget, on the other hand, the various ministries have obviously worked wisely, according to the envelopes intended for them. Pierre Gramegna announces a difference limited to 0.71% compared to the expenses which had been envisaged. Enough to make the Luxembourg treasurer say that, at the start of 2020, the public accounts were close to balance and that the budgetary situation was healthy.

Since then, we know that the fine ordering of public accounts has been upset. The covid-19 epidemic – unpredictable at the time of the 2020 budget vote – upsetting the distribution of the 20 billion euros. Since then, all of the measures put in place last March had to be taken on board. Partial unemployment, cost of leave for family reasons, management of expenses linked to the fight against the health crisis, recovery aid, support for many parts of the national economy.


Arbeitsminister Dan Kersch - Foto: Pierre Matgé / Luxemburger Wort

Dan Kersch spoke about the health crisis and its economic consequences, in particular on the evolution of the labor market. The Minister of Labor and Employment also raises the question of taxation.


Even if Luxembourg’s good financial health (still confirmed by the triple AAA rating agencies) has enabled it to once again benefit from loans via loans at negative rates, the State expects a major deficit for 2020. In particular due to substantial revenue losses and unprecedented expenses.

But this time it is difficult to see the glass fill up again at the end of the fiscal year, even if the latest Statec forecasts are cautious optimism about the fate of national activity.


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