Government deficit and debt increase

The government’s accounts for the first half of the year show a deficit of €102.3m, up €10.9m or 11.8 percent on the deficit for the same period last year.  The welcome reduction in the deficit in the second quarter of this year was not enough, however, to offset the increase registered in the first three months of the year.  Total Revenue rose by 7.46 percent to €1.31bn but total expenditure growth grew more, rising by 7.5 percent to €1.46bn. 

The biggest rise in total revenue came from taxes.  In fact, revenue taxes increased by €63.5 or 7.6 percent to €830.7m, of which 51.3 percent were income taxes and 48.7 percent were production taxes or taxes on imports.  Social Security contributions did not rise as fast, with just a 2.4 percent growth to €239.3m   Property income, current transfers and capital transfers between them contributed a €7.9m increase.  There was, however, a more considerable increase of 26.1 percent or €14.4m in market output.

The growth in Total Expenditure was mainly attributable to government intermediate consumption (up by €35.5m), followed by capital transfers (up by €26.4m), social benefits (+ €23.2m), employee compensation (+ €14.3m), and by property charges (+ €12.7m).  But there were also some increases in subsidies and current transfers.

The government’s financial assets rose by €633.7m, mainly in the form of accounts receivables, long-term loans and currency deposits.  But there were some increases in equity, shares and short-term loans.  Liabilities grew by €1.07bn, largely because of increased long term securities, though there were some additional liabilities in the form of short-term loans, long-term loans and accounts payable, which were however offset by a substantial decrease in short-term securities.  The Minister of Finance had said that the increased liabilities were because the Government borrowed ahead of requirements and went longer-term in its borrowing with a view to taking advantage of lower interest rates.

The Public Debt grew by 10.4 percent to €473.2m, but if government guarantees to state corporations is taken into account, overall government debt rose by €629m.   Some of the increase -- €88.7m to be exact -- was due to higher debt incurred under the European Financial Stability Fund.

The financial outcome during the first half of this year can be seen against the background of the results during the previous five years.  The deficit this year was €16.4m higher than the five-year average.  Since GDP this year has not grown at the five-year average rate, this has meant that the deficit as a percentage of the GDP has risen by around half a percentage point.