Government deficit for 2021 down to 2.5 percent of GDP

The general government balance and government debt are the main indicators for the current public finance conditions. The European convergence criteria allow a maximum deficit of 3 percent of GDP and a maximum debt level of 60 percent of GDP. Due to the exceptional circumstances, the European Commission temporarily suspended the European budget rules. However, the Dutch government was able to keep both deficit and debt below these limits in 2021, despite the coronavirus support measures. At 3.7 percent of GDP, the deficit over 2020 was still exceeding the maximum. The debt (54.3 percent of GDP) already fell below the European 60-percent ceiling at the end of 2020.

Revenue up 7 percent due to economic recovery

Last year, the government saw an increase in revenue by more than 25 billion to 377 billion euros. Revenues from taxes and contributions rose by more than 22 billion euros or 7 percent. They still fell slightly in 2020, due to the coronavirus crisis. In 2021, VAT brought in almost 6 billion euros more than a year earlier. This is over 9 percent up on 2020. Corporate tax revenues increased by almost 9 billion euros or 40 percent. Non-tax revenues increased mainly due to higher natural gas revenues.

Less increase in expenditure 

In 2021, government expenditure rose by almost 18 billion euros. This is less substantial than the revenue increase. A year earlier, expenditure still rose by nearly 40 billion euros, mainly as a result of the government's support measures to help companies, institutions and families through the coronavirus crisis.

Government subsidies fell by 4.5 billion euros, after a steep rise in 2020. This was mainly related to lower expenditure on the Temporary Emergency Measure for the Preservation of Jobs (NOW). Interest expenses continued to fall in 2021, despite rising public debt. High-interest debts from the past were repaid and replaced by lower-interest debts.

The lower expenses were offset by far higher government consumption; almost 18 billion euros up on the previous year. For example, the government purchased all sorts of services and goods to combat the coronavirus epidemic, such as tests, vaccines and call centres. Employee remuneration in the public sector went up by 4 percent in 2021.

Cash benefits rose by nearly 3 percent or more than 2 billion euros, mainly due to AOW (National Old Age Pensions Act) costs and benefits. In 2021, contributions to the EU increased by more than 10 percent. The State transferred 1 billion euros more than in the previous year. The government has compensated health insurers for the extra costs of the coronavirus pandemic in 2020 and 2021. The burden of this on the government amounted to almost 3 billion euros in 2021.

Debt ratio down to 52.1 percent, despite pandemic

Government debt as a percentage of GDP <Debt-to-GDP ratio>, also referred to as the gross debt ratio, stood at 52.1 percent at the end of 2021. This is 2.2 percentage points lower than at the end of 2020, when the debt ratio stood at 54.3 percent. This sharp drop is due to the fact that in 2021 nominal GDP rose considerably faster than the debt in euros. Over the past decade, the debt ratio was only lower at the end of 2019 than at year-end 2021.

The debt in euros rose by 13 billion, to 448 billion euros. This increase in debt is lower than the budget deficit of 22 billion euros. The gap is largely explained by the premium on the issuance of government bonds. According to European budget rules, only the principal (face value) of the bonds counts when determining the public debt and not the value of the debt at issuance, which includes premium or discount. In addition to the bond premium, the well-stocked cash position at the end of 2020 also played a role in the low debt increase in 2021. The deficit in 2021 could be partly financed with this. The government did not have to take on new debt to cover the deficit. On the other hand, the government's support measure to extend payment of taxes also led to a higher debt in 2021.