Government deficit larger than expected in 2002

08/09/2003 10:00

The Dutch government deficit rose to 7.1 billion euro in 2002, 1.6 percent of the gross domestic product. This is 0.4 of a percent point larger than the Ministry of Finance estimated in its 2002 Budget and Annual Financial Account.

Government surplus/deficit

Government surplus/deficit

The total surplus of the social insurance institutions fell to a deficit of 1.8 billion euro in 2002, central government had a deficit of 4.6 billion euro, and local government a total deficit of 0.7 billion euro. This is the first time since the beginning of the eighties that all three levels of government were in the red.

Government surplus/deficit by level of government

Government surplus/deficit by level of government

Revenues lagging

Lower than estimated revenues from tax and social premiums are one reason for the larger deficit. Income from corporation tax and tax on dividends was lower as company profits fell. Lower economic growth rates also pushed down income from most other taxes.

Revenues from a number of local taxes such as property tax and sewerage rates rose by more than economic growth, however. The total burden of taxation and social security contributions fell in 2002, to 39.3 percent of GDP.

Spending increases

Expenditure on social insurance and social provisions rose by nearly 8 percent in 2002. Spending on care rose by 13 percent, and more was also spent on education and safety. Employment in the government sector rose by 2,8 percent, pushing up wage costs for the government.

Debt according to EMU definition levelling out

Because of the larger government deficits, the government debt according to the EMU definition rose by 6 billion euro. As a percentage of GDP, it fell slightly, however, to 52.4 percent. The recent strong fall of the debt in terms of a percentage of GDP is thus levelling out.

Debt according to EMU definition

Debt according to EMU definition

Gerard Eding